Just one month from adopting the next state budget, legislators have learned the $19 billion spending plan they got from Gov. Dannel P. Malloy has a $70 million hole in it, according to a new report from nonpartisan analysts.
Republican legislative leaders subsequently charged that this shortfall exists because the administration dismissed a warning about rising health care costs five months ago.
While the governor’s staff insisted Friday that its $19 billion proposal is balanced, the new deficit projection also sets up a showdown between Malloy and advocates for more spending on social services and education – with the constitutional spending cap at the center.
“It is clear now that the governor disregarded what people in his own administration presented to him in their budget requests last October and November, months before he put out his budget,” House Minority Leader Lawrence F. Cafero, R-Norwalk, said. “We know now the budget was out of whack the moment he dropped it and exceeded the spending cap.”
Cafero was referring to the legislature’s nonpartisan Office of Fiscal Analysis, which last week issued a new projection tied to the governor’s $19 billion proposal for 2014-15 that was delivered to lawmakers two months ago.
While the administration designed the plan to run a $22.3 million surplus, OFA replaced that last week with a $69.4 million deficit – a $92 million shift in the wrong direction.
And after House and Senate GOP leaders sought details on the new gap in Malloy’s plan, analysts said more than half the problem involved a warning the state’s chief fiscal watchdog gave back in mid-October.
Comptroller Kevin P. Lembo recommended a $51 million increase in funds for retiree health care, largely to cover an anticipated surge in retirements among state correction officers.
The state must pay retirement benefits guaranteed by contract — but the funds weren’t included in the governor’s plan.
A second major problem, according to OFA, is that the budget provides $18.8 million less than what’s necessary to fund the magnet school programs within it. And that shouldn’t come as a surprise, since magnet school funding has fallen almost $19 million short in the current budget.
Smaller spending and revenue adjustments account for the remaining $22 million difference between the governor’s budget and the OFA analysis.
“The governor had a fiduciary responsibility to present the legislature and the people of Connecticut with a balanced budget, and he failed to meet that responsibility,” said Senate Minority Leader John P. McKinney, R-Fairfield, who is running for governor. “What’s worse is that the omitted expenditures look intentional.”
But Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, rejected the OFA assessment.
While he acknowledged the state’s contractual obligation to pay retiree health care costs, “we’re not convinced we’re going to need those funds” that Lembo recommended. “We’re convinced we’re going to live within the budget we proposed.”
Barnes said there is potential to reduce health care costs through various efficiencies, including savings from a new dental services contract award. Similarly, he said the administration is convinced it can offset any extra magnet school costs with savings in transportation and pre-kindergarten tuition programs.
“Pass our budget and we will live within it,” Barnes said.
Andrew Doba, the governor’s spokesman, said McKinney “will say literally anything to score cheap, political points.” Doba added that the GOP caucuses submitted no budget proposal last year, and have offered none so far this legislative session.
Still, the potential hole in Malloy’s plan could create a big problem for social services and education advocates, as well as for the governor’s fellow Democrats who control the Appropriations Committee.
The panel must recommend its own spending plan for next fiscal year by April 3, and tentatively is scheduled to do so Thursday.
Malloy’s plan – if it is balanced – left $8 million of space under the constitutional spending cap.
According to sources, subcommittees on Appropriations have offered about $60 million worth of ideas to add to governor’s bottom line.
Sen. Beth Bye, D-West Hartford, co-chairwoman of Appropriations, hasn’t discussed subcommittee recommendations, but she told The Mirror last week there’s pressure to spend more on mental health programs and support services for the developmentally disabled.
But if the OFA deficit is applied, Malloy’s plan is about $61 million over the cap. That not only kills the chances of adding much to the plan, but would require the panel to find more than $60 million in new cuts.
When asked about the switch from trying to add resources to seeking more spending cuts, Bye said Friday that “it certainly adds to the challenge” of developing a new budget. And while she didn’t discuss specifics, she added that “some important needs weren’t met in the budget that was given to us” by Malloy.
The state Constitution allows the governor and legislature to exceed the cap legally. The governor first must sign a declaration of fiscal exigency – essentially declaring a budget emergency – and then secure 60 percent votes of approval in the House and Senate.
But Malloy has said repeatedly he won’t go that route, and has criticized his Republican predecessors — M. Jodi Rell and John G. Rowland — for frequently breaking the cap.