Securitization leaves Rell in a quandary

According to her Democratic critics, Gov. M. Jodi Rell has spent much of the past 15 months dodging difficult budget decisions while piling up deficits for the next governor to close.

But when a legislative committee recommended Tuesday that Connecticut consumers pay $1.8 billion on their monthly electric bills over the next decade to balance the last budget of Rell’s tenure, it created a quandary for the lame-duck governor.

If she refuses to support the plan, the deficit she is on pace to hand off to the next governor, already projected at historic levels, will swell by more than $1 billion.

If she signs the bill, her fingerprints will be on something her fellow Republicans already are referring to as a “hidden tax” on residents and businesses.

Leaders in the Democrat-controlled General Assembly argue Rell’s prints already are all over the proposed securitization – or the sale of future state revenues at a discount in exchange for cash now. They accused her Wednesday of trying to cover her tracks by attacking a proposal that largely mirrors one of her own.

Sen. Eileen Daily and Rep. Cameron Staples, co-chairs of the finance committee, say Rell has avoided tough decisions on budget (Jacqueline Rabe)

“Is there any proposal she will actually stand by or will she always run for the hills when the criticism comes?” Rep. Cameron C. Staples, D-New Haven, co-chairman of the Finance, Revenue and Bonding Committee said Wednesday.

The governor’s criticism of the bill “is an insult to every member of our committee,” added the panel’s other co-chair, Sen. Eileen M. Daily, D-Westbrook. “This is a time we need strong leadership.”

According to fiscal analysts, state government also needs money.

The nonpartisan Office of Fiscal Analysis projected in February that the preliminary $18.93 billion budget adopted last September for 2010-11, is running $725.7 million in deficit. That shortfall pales in comparison to the mammoth, $3.88 billion gap analysts project for 2011-12.

Rell – who will oversee the first six months of the 2010-11 fiscal year before her term ends in January – and the legislature, potentially would hand off $4.61 billion in deficits for their successors to fill.

And if they don’t raise the $1.3 billion sum through securitization that they built into the 2010-11 budget, the combined deficit for the next two years approaches $6 billion.

Given that staggering prospect, Democrats asked, why did Rell criticize the securitization option endorsed Tuesday in committee?

“Some sort of securitization is necessary,” Rell wrote in a brief statement. “This option, however, is the least desirable for Connecticut’s beleaguered families.”

The option she refers to involves a committee proposal to extend expiring surcharges on the monthly bills of United Illuminating and Connecticut Light and Power Co. customers for another decade. The committee specifically wants to maintain 56 percent of the surcharge customers have paid since 2000 to reimburse utilities for costs tied to a state-ordered deregulation process.

But instead of reimbursing the utilities, which will finish recovering their costs soon, the surcharge will go to the state.

That extension would amount to $180 million per year, or $1.8 billion over the next decade. State government would sell the rights to that revenue stream to any investor willing to provide $1.3 billion now to help balance the next budget.

“Ratepayers, who have paid these charges for the last 10 years, have rightfully been expecting the charges to soon be expiring,” the governor said.

Then why did the Rell administration, working with state Treasurer Denise L. Nappier, offer a similar option in February in a report identifying several potential revenue streams that could be securitized? Under the administration’s scenario, about $1.5 billion of the $1.8 billion burden would fall on ratepayers, with the remaining $300 million coming from energy conservation programs – which are also fueled by surcharges on consumer bills.

The administration notes that Rell did not sign last summer’s budget bill, which mandated the securitization and directed the governor and treasurer to identify sources of revenue to sell. But she also did not veto it, instead allowing it to become law without her signature.

And just two weeks before the document became law, Rell had offered a new budget proposal that called for state government to raise $1.2 billion through securitization.

So if the governor set a securitization target that nearly matches the Democrats’ $1.3 billion mark, offered an option herself that raids consumers’ electric bills, and chose not to exercise a veto that could have spared her this problem, why – Staples asked – is she objecting now?

Senate Minority Leader John McKinney: Rell should have vetoed the budget (Jacqueline Rabe)

“If there’s any hope of reaching a budget agreement this year, the governor has to abandon her approach of trying to take political advantage of every situation,” he said, adding that Rell’s comments have harmed the already difficult prospect of negotiating a revised, balanced budget for 2010-11.

The governor’s press office would not say Tuesday or Wednesday when asked whether Rell would sign the committee’s securitization bill if it reaches her desk.

But her fellow Republicans in the legislature said it would be a huge mistake for her to do so.

“The people in the state of Connecticut are tired of being nickeled-and-dimed,” House Minority Leader Lawrence F. Cafero of Norwalk said. “They’re being killed by a thousand cuts and the people holding the knife are the Democrat-controlled legislature, not the utility companies.”

John McKinney of Fairfield, the top Republican in the Senate, called securitization “a bad idea from the start,” and said consumers were assured this surcharge would expire “and they should see some relief.”

McKinney added Rell should veto the finance committee’s plan and could have prevented securitization entirely by taking action last September.

“It’s too late to mince words,” he said. “She should have vetoed the budget. It’s a bad budget.”