A new fiscal year: state budget already in the red
Optimistic assumptions about federal aid and social service caseloads came back to haunt state officials Friday as Connecticut’s $19.01 billion budget, barely out of the gate, stumbled more than $60 million into deficit.
In its first budget forecast since the fiscal year began July 1, Gov. M. Jodi Rell’s administration reported rising income and sales tax receipts weren’t enough to offset entirely a $193.4 million shortfall in federal stimulus grants and $171.7 million in projected cost overruns.
“I will be working with my budget officials to erase the shortfall through administrative actions,” said Rell. “The fiscal year has barely begun and we have an opportunity – one we cannot afford to miss – to control this deficit before it grows unmanageable. I will be announcing the details of my budget-cutting plans soon.”
Rell added that “I am encouraged by the improvements in the state revenue picture. But it would be a mistake to look at these projections and believe that our problems will resolve themselves.”
Rell’s budget office reported the $63.4 million deficit to state Comptroller Nancy Wyman, who will issue her first forecast on Sept. 1
The Republican governor and Democrat-controlled legislature gambled when they approved the budget in early May, assuming Congress would extend emergency federal stimulus grants for health care, child welfare services and education, all set to expire on Dec. 31.
Federal lawmakers did so earlier this month, but state government will receive significantly less than anticipated. Much of that is due to federal requirements that states use the additional education aid to supplement already-approved grant programs for municipal school districts.
And though full details behind more than $170 million in new, projected cost overruns for state government were not available Friday, the Rell administration believes $144 million of that is tied to the Department of Social Services.
In a press release announcing the deficit, the governor attributed that problem, in part, to “continued high demand for social services.”
Social services officials reported in early June that enrollment in HUSKY, the state’s primary health coverage program for poor families, has increased by 10 percent in the past year and by 15 percent since the last recession began in March 2008.
The governor also cast some blame for the deficit Friday on a legislative task force, charging for the second time this month that the Commission on Enhancing Agency Outcomes has failed to meet its responsibility to find at least $50 million in new savings already built into the budget’s bottom line.
“The savings assumptions built into the budget must either be achieved as planned or obtained through other means,” Rell said.
But Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, called Rell’s criticism premature, noting the commission has until Dec. 31, by law to issue a report. Both Williams and leaders of the commission also contend they already have identified more than $50 million savings, and that some of their ideas were built into this year’s state budget – but just haven’t been recognized by the administration.
Williams added that Rell needs to provide lawmakers with more details behind the projected cost overruns. He noted that besides rising social service caseloads, the administration’s report to Wyman also refers to problems achieving savings tied to contracts and other expenses.
“The Rell Administration has apparently given up on making $170 million in spending cuts,” he said. “Given the size of the state’s fiscal challenges, it is imperative that the Rell administration makes the difficult decisions necessary to reduce spending.”
Further complicating the budget picture, the administration estimates an extra $40 million will have to be spent on refunds tied to abandoned property claimed by the state.
Republican lawmakers criticized both Rell and the Democratic majority for making risky assumptions when adopting the new budget, and Sen. Andrew W. Roraback of Goshen, ranking GOP senator on the Finance, Revenue and Bonding Committee, said it was a poor approach from the start.
“I think everyone wants to hope for the best,” he said. “The problem is that in this budget, the Democrats planned for the best. But you can’t count on that.”
Roraback added that the new budget also was balanced on more than $955 million in new borrowing. Rell has said she believes that borrowing can be scaled back to just over $700 million, thanks to a last-minute jump in the surplus from the prior fiscal year.
But unless the new deficit is eliminated, the prospects of that borrowing increasing are good, Roraback said.
There was some good news Friday mixed in with the bad.
The administration estimates that income and sales tax revenues are running $127.5 million and $153.8 million ahead of projections, respectively, and other tax receipts also are up nearly $66 million.
And though the additional social service costs are a problem, many of them involve programs funded through the federal Medicaid program. That means that while state government likely will spend more than planned, it also now can anticipate an extra $77 million in federal reimbursements to cover part of those costs, the administration reported.
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