Comptroller Kevin P. Lembo CTMIRROR File Photo
State Comptroller Kevin P. Lembo
State Comptroller Kevin P. Lembo CTMIRROR File Photo

If Connecticut’s chief fiscal watchdog is correct, there’s a $52 million hole in the new state budget Gov. Dannel P. Malloy and majority Democratic legislators hope to enact Saturday.

Despite a warning sent to the administration seven months ago by Comptroller Kevin P. Lembo – also a Democrat – the compromise budget unveiled Friday by the governor and legislative leaders fails to include $51.6 million to cover contractually required health insurance costs for retired workers.

Lembo’s office, which administers health coverage for retirees, confirmed Friday evening it still thinks that increase is necessary to handle an anticipated surge in retirements in the new budget – particularly involving state prison guards.

And a spokesman for the union representing correction officers said it would like the funds restored to the budget. But he also acknowledged the governor and legislature are in a tight spot, given rapidly shrinking projections for state tax receipts.

Though full details of the tentative budget deal hadn’t been released as of 7:30 p.m., Friday – nearly nine hours after Malloy and Democratic leaders announced it – the governor’s budget director, Benjamin Barnes, confirmed that the $51.6 million Lembo sought was not included in the spending plan, which is expected to approach $19 billion.

Malloy also failed to include the $51.6 million in the $19 billion budget he proposed for 2014-15 in February.

The legislature’s nonpartisan Office of Fiscal Analysis issued a report in mid-March concluding that the governor’s plan was $69.4 million out of balance, and that the $51.6 million shortfall in the retiree health care account was the chief culprit.

Barnes has rejected Lembo and OFA’s assessment.

While he acknowledged the state’s contractual obligation to pay retiree health care costs during an interview in mid-March, he said, “We’re not convinced we’re going to need those funds. 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.

Still, the legislature’s Appropriations Committee was concerned enough to add the money Lembo sought in the budget proposal it adopted March 27. The committee’s solution was to take $51.6 million from this year’s budget surplus – estimated then to be $505 million – and carry it forward into 2014-15.

But fiscal analysts have since reduced that surplus forecast drastically, from $505 million to $43 million, to reflect shrinking state tax receipts. That problem also led analysts to declare the Appropriations Committee budget about $285 million in deficit.

Faced with the prospect of wiping out huge amounts of red ink, and having almost no surplus to use, Democratic legislative leaders went along with the Malloy administration’s strategy and opted to dismiss Lembo’s warning.

The Republican minority in the House and Senate included the $51.6 million in both of the budget proposals it unveiled over the past three weeks.

Larry Dorman, spokesman for Council 4 of the American Federation of State, County and Municipal Employees, said the union that represents prison guards wants to see the $51.6 million in the budget.

“We’re always concerned” when the state fails to save enough to meet obligations to workers, he said. “That’s why we’re always monitoring these budget developments.

But Dorman said projecting worker retirements isn’t an exact science.

And he noted that Malloy undertook a major initiative in the second year of his term to bolster the pension fund significantly.

“This process is always fluid and subjected to ups and downs, both in the short- and long-term,” Dorman said. “But we do have to take the long view and remember that this governor and legislative leadership have made a commitment to funding pensions, something that their predecessors didn’t make.”

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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