Just 2½ months before the end of the fiscal year, Gov. M. Jodi Rell and the state legislature agreed Wednesday on a plan to eliminate nearly 90 percent of the projected $371 million deficit without tax hikes or major reductions in municipal aid.

The plan cuts million of dollars from social services, health care and education programs, however.

Rell signed a measure into law that cancels $323.2 million of the shortfall just 30 minutes after the Senate unanimously adopted the plan, and one day after the House of Representatives endorsed it 147-1.

A compromise between the Republican governor and the Democrat-controlled legislature, the bill employs a combination of spending cuts, additional federal revenue and raids on special accounts and trust funds to bring this year’s deficit just under $50 million.

Deficit reduction 4-15-10

Democrats agreed to set aside earlier proposals to raise taxes on wealthy estates and to impose a 5.5 percent levy on gross hospital revenues. Those initiatives are expected to be considered again, though, as the legislature next tackles the $725.7 million deficit projected for the preliminary $18.93 billion budget for 2010-11.

eye to eye

Seeing eye to eye. Republican John Kissel, Democrat Donald DeFronzo and the full Senate approved a deficit-mitigation bill. (Keith M. Phaneuf)

“There is more to do, but today we can say we came together to solve the problem for 2010,” Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, said. “Everybody stepped up. That’s what made this a success.”

Rell didn’t offer any comments after Wednesday’s vote, but acknowledged Tuesday that the bill hardly solves all of Connecticut’s fiscal problems.

“It is vital for all of us to continue to work together to surmount the remaining fiscal hurdles,” the governor said. “We must still reach agreement on a securitization proposal and on a plan to eliminate the deficit for the next fiscal year.”

The compromise largely came together over the last three weeks as Democrats, who control both the House and Senate, first resolved an internal battle.

Moderates in the Senate in particular pushed their House Democratic counterparts to accept previously rejected cuts to social services, health care and education.

These included higher co-payments and restrictions on vision services and prescription drug coverage for low-income patients covered by HUSKY and Medicaid

The hardest pill for Rell and her fellow Republicans to swallow involves moving the health benefits provided through General Assistance – the state’s welfare program for single adults without children – under the umbrella of the federal Medicaid program.

The Rell administration had cautioned against such a move, noting that in order for a program to qualify for federal assistance through Medicaid, it must operate under “entitlement” rules, meaning all applicants who meet program guidelines are entitled to receive benefits. This prevents states from capping spending on the program, and in the long run could drive up General Assistance costs despite increased federal aid, the administration warned.

Both sides also continue to divert resources from the Special Transportation Fund, as well as from special accounts and trusts. Democrats and Republicans reassigned about $97 million to help support General Fund spending.

Given that there just 11 weeks left in the fiscal year, the bill technically raids nearly $240 million in revenues originally assigned to the next budget, offsetting that move with matching amount of spending cuts, additional federal revenue and transfers out of special accounts and trusts.

Despite the mood of compromise Wednesday, Democrats and Republicans both offered plenty of signals that the next budget debate won’t be as cordial.

Besides the $725.7 million deficit projected for 2010-11, the legislature’s nonpartisan Office of Fiscal Analysis estimates state finances face a built-in shortfall of nearly $3.9 billion, a gap worth more than 20 percent of this year’s entire budget.

Democrats have argued a fiscal hole of that size can’t be closed without tax hikes, and many say the 2010-11 deficit won’t be plugged without them either.

Williams praised the bill adopted Wednesday for trimming but not “shredding” the state’s social safety net, but made it clear that preserving these services remains a top priority for Democrats. “We need to confront the fiscal realities, not get mired in ideologies,” he said.

But Sen. Daniel Debicella of Shelton, the ranking Republican senator on the Appropriations Committee, said the bill adopted Wednesday “is not slash-and-burn,” and legislators should brace for more spending reductions. “Any bill that we as Republicans and Democrats can agree upon, that cuts spending, is a good bill for Connecticut,” he said.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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