Agencies hope CT’s checkbook can cover costs until federal shutdown ends

The federal government shutdown could sorely test the state’s checkbook, particularly when it comes to social service and health care programs, according to contingency plans state departments have filed.

Nonpartisan state analysts identified about 30 percent of the federal funding Connecticut normally receives that likely would be interrupted.

In some cases that’s because a particular program in Washington is out of cash. In others, it’s because the federal agencies responsible for sending those dollars to Connecticut are off the job.

State’s cash flow has improved

State Treasurer Denise L. Nappier said she expects no "significant cash flow issues" if the shutdown is brief.

But depending on the scope and length of the federal impasse, that could change, Nappier wrote in her monthly report to the legislature.

Fortunately for Connecticut, the cash pool has been showing signs of improvement after two years marked by shortages.

The treasurer’s October report, which covers August transactions, showed a weekly average of $747 million in the common cash pool. That’s up from the $586 million average in July. Weekly disbursements from the pool average about $540 million.

Nappier said last month that if improvement continued, she planned to cancel a $300 million line of emergency credit her office secured last winter.

Whether that happens could hinge on the shutdown, which could strain finances for several Connecticut agencies.

Social Services could be hardest hit

State government received $6.4 billion in federal aid in the last fiscal year, according to the legislature’s nonpartisan Office of Fiscal Analysis. More than two-thirds of that went to the Department of Social Services.

And about half of those funds -- more than $3.1 billion -- went for Medicaid, a program that will continue the shutdown.

This year's state budget dedicates about $2.4 billion in Connecticut funds for Medicaid. The federal share is about $2.7 billion, meaning Connecticut has funds to cover Medicaid costs for some time during the shutdown.

Other programs aren’t so fortunate.

Connecticut pays all up-front costs — about $25 million per month — for welfare for poor families with children and for child care development services. But Washington normally sends about half of that back each quarter.

“The state may no longer be able to draw down these funds and a significant revenue loss could occur,” state social services officials wrote in their contingency plan. “… In a massive federal government shutdown, this may place a significant burden upon the state related to the need for short term borrowing of funds.

Another program on borrowed time helps needy families heat their homes.

Connecticut received $76 million last fiscal year to run the federal Low-Income Home Energy Assistance Program in this state. But LIHEAP isn’t exempt from the shutdown.

Social Services officials estimate that $7.4 million is left unspent from last year’s program — enough to pay for “the first wave of fuel deliveries" -- until about Nov. 15.

Transportation, education, job-training programs

The second-largest recipient of federal aid, the Department of Transportation, anticipates that its funding won’t be jeopardized, although some could be delayed.

And given that the DOT receives as much as $1 billion per year from Washington, “the department might need to consider using state bonds to fund projects on a temporary basis,” Commissioner James Redeker wrote in his contingency plan.

State Motor Vehicles Commissioner Melody Currey warned that her agency’s truck safety inspection program “is heavily dependent upon federal funds for its operation,” and that federal dollars might not be available after Oct. 17.

Connecticut either could limit its inspection program or fully fund the positions itself.

The State Department of Education will spend $700,000 Thursday to pay 130 educators whose salaries had been covered by the federal government — and hopes that Washington still reimburses the state despite the shutdown.

If it lasts through October, the state may need to spend $45 million to protect school breakfast, lunch and other programs.

Education Commissioner Stefan Pryor said funding for programs that serve disabled and special education students will not be impacted, but almost everything else previously funded by the federal government will be left to the state to figure out.

“If the shutdown last days or a short number of weeks the liklihood is that we can rely on lapsed funds for the purpose of sustaining these critical programmatic activities,” Pryor said referring to program surplus dollars from past years.

The University of Connecticut warned that after “a few weeks,” research grants could be significantly affected, threatening projects and some faculty positions.

UConn’s contingency plan noted that a wide variety of student financial assistance, including grants, loans and work-study programs, all would be hurt by a prolonged shutdown.

Regular unemployment benefits will continue during the shutdown, but job training programs could face more belt-tightening.

The state Labor Department isn’t expecting any federal aid during this stoppage for the five regional Workforce Investment Boards, which already faced a 19 percent budget cut due to the federal across-the-board cuts, or sequestration, earlier this year.

Read the agency contingency plans here.

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