If unionized state employees reject concessions a second time, it could have repercussions beyond the deep cuts and layoffs Gov. Dannel P. Malloy ordered four weeks ago: It also could trigger a showdown between Malloy and the legislature over just how much authority the governor has to slash spending.

Did lawmakers give Malloy unfettered authority to distribute over $1.6 billion in cuts across state government? And in particular, does he have carte blanche to impose layoffs on three watchdog agencies that by law enjoy special budgetary protection?

State Sen. Toni R. Harp, D-New Haven and co-chairwoman of the Appropriations Committee, said  Wednesday she believes that by cutting some agency budgets by more than 10 percent, Malloy is exceeding the authority the legislature gave him.

“I know it’s uncomfortable to deal with the Legislative Branch, that it’s inconvenient,” she said. “But that’s our system of government.

A number of major state agencies face cuts in excess of 10 percent under Malloy’s July 15 budget reduction plan, but it was a small one–the newly-formed Office of Governmental Accountability, with a total budget of less than $10 million–that raised the issue of the governor’s power to trim spending.

The new OGA was made up of nine formerly-independent watchdog agencies, including the Freedom of Information Commission, the Office of State Ethics and the State Elections Enforcement Commission. Officials at the latter three, all targeted for reductions of 15 percent, have questioned Malloy’s authority to cut beyond 10 percent.

Both staffing and funding for all nine divisions of the new OGA were reduced from last fiscal year’s level as the governor and legislature struggled to close a built-in shortfall for 2011-12 that once stood as large as $3.67 billion.

But after the $20.14 billion budget for this year was adopted, the State Employees Bargaining Agent Coalition announced in mid June that it had rejected the tentative concession deal officials were counting on to provide $700 million in savings this year and another $900 million next fiscal year.

To help plug that gap, lawmakers met in special session on June 30 and July 1, and adopted a measure expanding the governor’s fiscal authority to compensate for the lost savings.

Prior to the session, Malloy talked publicly about asking lawmakers to double the governor’s existing power to reduce by 5 percent any quarterly allotment for any appropriation — excluding municipal aid.

But when Malloy announced his budget-balancing plan on July 15, he ordered a 17 percent cut to the Office of Governmental Accountability’s $9.3 million budget. And his budget staff assigned the FOIC, ethics and elections enforcement divisions to reduce their spending by 15 percent each to help the merged agency meet its target.

“We believe that the statute does give the authority to make the necessary reductions in the Executive Branch if the SEBAC agreement isn’t approved,” Gian-Carl Casa, undersecretary for legislative affairs in the Office of Policy and Management, the governor’s budget agency, said Wednesday.

Casa cited Section 8 of the statute, which charges the governor with replacing the $1.6 billion in savings intended to come from the concession plan with other spending cuts. That section says the budget office, with the governor’s approval, shall reduce expenditures “by the amount of the Executive Branch budget savings” in the concession deal, while making no mention of any 10 percent reduction limit.

Casa noted that the measure also required Malloy to submit his budget-balancing plan to lawmakers by July 15, thereby giving legislators the option to call themselves into special session and attempt to modify any changes they opposed. The legislature’s Appropriations and Finance, Revenue and Bonding committees opted not to conduct public hearings on the plan until after the second union vote, which is expected to wrap by the middle of next week.

But another section of the measure provides that in the event of a “fiscal exigency,” the governor may reduce any appropriation, but by not more than 10 percent. And when Harp introduced the measure on the Senate floor six weeks ago, according to the session transcript, she noted the 10 percent rescission authority, layoffs and the need to file a plan with the legislature, but not any broader budget-cutting authority.

OPM’s interpretation is that reducing quarterly allotments by up to 10 percent and ordering layoffs are not the only tools by which the governor can meet the obligation in Section 8 to replace the concession savings with other cuts. He also simply can reduce department and agency budgets for the entire year, and by amounts greater than 10 percent. If the legislature doesn’t act to override such changes, they stand.

A second problem between Malloy and some lawmakers arose with eight layoffs ordered at the three chief watchdog agencies, involving five unionized and three non-union jobs.

At the height of the scandal that drove former Gov. John G. Rowland from office, state lawmakers legally insulated Connecticut’s FOIC, ethics and elections enforcement from any emergency cuts after the budget had been adopted, arguing this was essential to keep government open and honest.

And while emergency budget legislation approved July 1 did include language overriding that 2004 statute, it also says that if unions adopt concessions in a new vote and sign an agreement with the state, Malloy’s expanded powers “are repealed on the date of said approval.”

But legislators said that while this would restore funding for the watchdog agencies, they still would need permission from the administration under the state’s personnel act before they could rehire laid-off workers. Otherwise, the funding for those jobs go unspent, and ultimately return to the General Fund at the fiscal year’s end.

“If we have a (concession) agreement, there is no policy justification and no budget justification that I can think of for not immediately restoring both dollars and positions for these critical watchdog agencies,” said Rep. Andrew M. Fleischmann, D-West Hartford, one of the leading advocates for the 2004 fiscal protection statute. “I do believe we are in a terrible budget crisis and that the governor’s budget office is scrambling to make sure we end up with a balanced budget. Hopefully we will end up with a union concession package that is approved.”

Harp also said the watchdog jobs should be restored if concessions are granted. “We vote on these budgets,” she said. “If we have a balanced budget with these concessions, we have an obligation to recognize that (legislative) intent.”

“I have a significant concern, between the merger and the cuts and the layoffs, about the ability of these agencies to continue to operate and to fulfill their statutory obligations.” added Sen. Gayle Slossberg, D-Milford, co-chairwoman of the legislature’s Government Administration and Elections Committee.

But Casa would not say Wednesday whether those workers would be allowed back.

“Right now we’re dealing with the reality of not having an agreement,” he said. “We will revisit the budget in light of vacancies, retirements and other things if that has changed.”

The executive directors of the Office of State Ethics and of the Freedom of Information Commission, Carol Carson and Colleen Murphy, declined to comment Wednesday. But both testified before the legislature this spring that staff cuts tied to the merger — which occurred before the layoffs ordered by Malloy — would leave them hard pressed to meet their statutory obligations.

And Albert Lenge, executive director of the State Elections Enforcement Commission, said Wednesday that without access to the full budget and staffing resources assigned by the legislature, “I’m worried that their could be delays and problems in the implementation” of the public financing program for state elections in 2012.

“The best interests of the state of Connecticut are served when the watchdog agencies are not subject to the governor’s budget office,” Fleischmann said, adding he understands Malloy ordered layoffs solely out of fiscal need. “They are apolitical in nature and I still believe as I did in 2004, that they are deserving of a different kind of budget process to protect them from any type of political calculation or retribution. That’s true whether the governor is a Democrat, Republican or an independent.”

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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