Foley has lots of confidence, few details, on plans to fix CT budget

CT Mirror

Tom Foley

To say Tom Foley is keeping his cards close when it comes to his plans to fix state finances might be an understatement.

The Greenwich businessman and Republican gubernatorial contender’s positions on key income and business taxes and public-sector wages are guarded at best.

His plans to shield municipalities and public college and university students from the budget knife also rest on Foley’s supreme confidence that his business acumen can find savings state officials have missed for decades.

“None of the candidates have the experience I have and the ability to do that,” Foley, 62, told The Mirror during an interview in Greenwich last week. “So anybody who says they’re going to get our state government leaner than I will doesn’t know what they’re talking about.”

Four years ago, when Foley narrowly lost the 2010 gubernatorial race to Democrat Dannel P. Malloy, the Greenwich businessman’s critics insisted he didn’t know what he was talking about – at least when it came to state finances.

With nonpartisan analysts projecting one of the largest state budget deficits in national history – an 18 percent shortfall built into the 2011-12 fiscal year – Foley insisted he could close that gap in the first year without tax hikes, borrowing, or any cuts to local school grants. The key was his forecast for a very robust economic recovery, a prediction that ultimately fell far short of reality.

This time around, the problem, while still significant, is less imposing, and so is Foley’s response.

Nonpartisan analysts now project a nearly $1.4 billion hole in the first new budget after the election, a 7 percent shortfall built into 2015-16 finances.

Trying to hold the line on spending

Foley’s solution hinges on the fact that those same analysts estimate state spending must grow next year by the same $1.4 billion to maintain current services and meet all legal obligations.

So if Connecticut can just find a way to get by with the same $19 billion budget it plans to spend this year, he says, the deficit goes away.

If it can hold the line two years in a row, Foley says, his administration could reduce the sales tax and a second levy aimed mainly at small businesses.

Sounds simple? Painless?

It isn’t.

Like most states, Connecticut is at the fiscal mercy of a few programs that eat up huge chunks of any new spending in the budget.

It is required to spend about $500 million more next year on pension fund contributions and payments on bonded debt.

It legally can’t hold the line there.

Pay freezes and tuition hikes?

So where can Foley find at least some of the $1.4 billion in cuts he needs?

Only about one-third could be achieved by withholding inflationary increases to departmental budgets, or by reneging on often-promised-but-never-delivered statutory increases in municipal grants.

According to analysts, roughly $100 million more is needed in the next budget for wage increases.

Foley could ask workers to take a wage freeze or pay cut, and as governor would have the authority to order layoffs . But he wouldn’t tell The Mirror whether those options were under consideration.

“I’m a good negotiator, “ he said. “I’ll negotiate the best contract I can for the citizens of Connecticut.”

“It is hard to respond to somebody who doesn’t say anything,” said Roy Occhiogrosso, who ran Malloy’s 2010 campaign and served as the governor’s senior policy adviser in 2011 and 2012.

Calling Foley’s fiscal strategy a “jumbled mess,” Occhiogrosso questioned whether the Republican lacks a plan for Connecticut, or is withholding details to avoid antagonizing voters.

More than $3 billion, about one-sixth of the operating budget, is tied up in major grants for cities and towns. But proposals to reduce here traditionally face overwhelming bipartisan opposition and Foley said he wouldn’t cut local aid.

Like municipal grants, operating funds for public colleges and universities – particularly for the University of Connecticut – remain very popular at the Capitol.

The state provides about $700 million per year in direct aid for college and university operations, not counting covering significant fringe benefit costs for many higher education employees.

But that aid level has just returned to where it stood in 2011. Malloy and the legislature slashed about 15 percent off higher ed operating funds in 2012 to help close the last big state budget deficit.

Still, Foley said “I think there are probably ways to cut back spending there without compromising the quality of education, particularly if colleges and universities reduce the size of their administrations and other non-teaching staff.”

Yet Foley also said he doesn’t want college students to face further tuition and fee hikes. State colleges and universities responded to the 2012 drop in budget support with double-digit tuition and fee hikes stretched out over three or four years.

If a 15 percent reduction saving $100 million produced huge tuition and fee hikes, how much could Foley cut without triggering the same result?

The Greenwich businessman said the governor needs to send a stronger message to higher ed boards that tuition hikes simply aren’t acceptable.

Targeting the biggest pot of money: Health Care

That leaves Foley with just one more big pot of money to tap and it’s a big one – but not without its complications.

Connecticut will spend $2.3 billion this year on Medicaid and another $1.2 billion on health care for state employees and retirees.

The challenge to save money here involves both restrictions that come with the system, and some Foley has imposed on himself.

CT MIRROR

Tom Foley addressing the AFL-CIO.

Unlike his rival in the GOP gubernatorial primary, Senate Minority Leader John P. McKinney of Fairfield, Foley has not called for reopening the master contract that guarantees health care, pensions and other benefits for workers and retirees.

“A deal’s a deal,” Foley said. “So any contract we have in place, I’m not going to break a contract.”

Still, even though Foley won’t seek to reduce benefits, or to get workers to pay more, he says he can save big dollars by pressuring insurance companies and health care providers to give the state a better deal.

“Businesses do this all the time,” Foley said. “The state is the largest consumer of health care services in the state. It has that much market power.”

But if that sounds too good to be true, some of the Republican candidates critics on both sides of the aisle say that’s because it is.

State Comptroller Kevin Lembo, a Guilford Democrat who oversees health care purchasing for worker and retiree benefit programs, noted that the annual cost increase in this area was driven from almost 9 percent in 2013 to just 2 percent in 2014.

“We have been working diligently over the last four years to buy and administer our health plan in a smarter and more efficient way,” Lembo said. “There is always more work to be done, but it is not easy and does not lend itself to sound bites.”

And besides negotiating prices down with insurers, Lembo also benefited from health care concessions the unions granted Malloy in 2011. Foley won’t go that route.

“Tom’s budget numbers simply don’t add up,” McKinney said. “He won’t give one specific area in the budget where he will cut.”

Even if Foley were to somehow cut the cost of health care benefits for workers and retirees by 10 percent – without turning to concessions – that would save the budget only about $130 million.

That leaves Foley staring lastly at Medicaid and still needing several hundred millions of dollars in savings.

There are several problems with that.

Medicaid spending already is trending downward. It dropped by about $200 million this year. And that includes a controversial assumption that a record-setting savings of more than $100 million will be achieved through fraud prevention.

Further complicating matters for Foley: for every $1 the state spends on Medicaid, it receives anywhere from 50 cents to $1 back in matching payments from the federal government. Effectively, that means the Foley administration would have to share any Medicaid savings with Washington.

Ellen Andrews, director of the New Haven-based Connecticut Health Policy Project, said she doesn’t believe Foley could cut Medicaid costs much in the short-term by trying to negotiate better deals with hospitals and doctors.

“To be honest, we are already underpaying our providers,” she said, adding that lower provider rates means fewer will treat poor patients, limiting health care access for many.

A better solution, Andrews said, would be for Foley to spend more money in the short term, increasing rates and providing grants to help providers develop better electronic patient records.

If more Medicaid patients regularly visit doctors, Andrews added, they could stay healthier and avoid needing the most expensive treatment for severe illnesses that could have been prevented.

Clear about a sales tax cut …

But while spending cuts dominate Foley’s budget strategy, he does have plans for Connecticut’s taxes – although there are some unknowns here as well.

By holding spending flat for two years, Foley said, he’s confident Connecticut can afford to slice half of a percentage point off its 6.35 percent sales tax.

Another cut involves eliminating the business entity tax, a $250 fee levied biennially, primarily against small and mid-sized businesses.

Foley also said his administration would undertake a thorough review of all state taxes and fees, eliminating any that could be shown to cost more to administer than the revenue they collect.

“We are going to make changes to our tax code that will stop driving businesses away,” Foley said.

Similarly, Foley said he would not support major state assistance to businesses if the aid to be given represented more than half of the annual salaries of the jobs created.

Most of the Malloy administration’s major deals, including funding for a bioscience initiative in Farmington and an expansion program for United Technologies Corp., failed to meet this standard, Foley said.

… Less certain about tax cuts for corporations, teachers

pool photo/Hartford Courant

Tom Foley and John P. McKinney face off.

But the Greenwich businessman was less clear about other aspects of the business climate, particularly a controversial paid sick leave mandate that Malloy signed into law two years ago.

“I think it’s an example of things the governor has done that are anti-business,” Foley said, adding he was stunned when Malloy recently joined the labor groups that promote paid sick leave to celebrate the anniversary of the law’s passage.

Yet despite blasting Malloy for celebrating the anniversary, Foley would not answer directly when asked if he would support its repeal.

“You know, I want to sit down with business leaders and find out what it is about Connecticut that they find so annoying,” he responded.

Occhiogrosso said Foley is wrong on sick leave, and that studies show it leads to healthier workers, and in turn, greater productivity.

“Tom Foley is running the most issue-free, shallow campaign I think Connecticut has ever seen,” he added. “He refuses to even take positions on issues. It is an insult to the people he says he wants to govern.”

Foley also declined to say whether he would support tax cuts that Malloy signed into law that are scheduled to take effect in the next budget. These include: repeal of a surcharge on the corporation tax and a state income tax deduction for retired teachers living in Connecticut.

“If it’s supported by good public policy, then they can count on it staying,” Foley said. “If it’s bad public policy, no, I wouldn’t count on it.”

What Connecticut can count on with a Foley administration, he added, “ is having a business person who will send a strong signal to business that he understands what policies will work for them. Nobody is going to create a more effective state government than I will.”