On the state spending cap, Malloy and GOP have checkered past
While Gov. Dannel P. Malloy portrayed the spending cap Thursday as an unavoidable constraint on the next state budget, governors and legislators from both parties have skirted that constraint repeatedly for a decade.
Leaders of the legislature’s Appropriations Committee can’t understand why both Gov. Dannel P. Malloy and Republican legislative leaders are attacking their efforts to move more state spending outside of the constitutional cap to preserve social services.
Since 2011, the Democratic governor has proposed or signed into law hundreds of millions of dollars in fiscal maneuvers to shift spending out from under the cap.
And GOP lawmakers have short memories, committee leaders say, having voted overwhelmingly to adopt a 2007 budget that shattered the cap by almost $700 million — a record in the cap’s 25-year history.
With the state’s dysfunctional cap crippled for nearly a decade, critics argue, legally exceeding the cap — or moving funds outside that system — has become standard operating procedure, and none should feign shock or surprise.
‘People use the cap when it’s convenient’
“It’s the same thing we’ve been doing for years and years, and now, all of a sudden, nobody seems to take that into account,” Rep. Toni Walker, D-New Haven, co-chair of the Appropriations Committee, told The Mirror on Thursday.
“People use the cap when it is convenient,” added Sen. Beth Bye, D-West Hartford, the panel’s other co-chair.
Behind the Capitol debate about the cap this year is the question of whether the legislature will seek major tax hikes to reduce cuts in the governor’s proposed budget.
Walker, Bye and their colleagues on the budget-writing committee have until April 30 to complete their counter-proposal to the $40 billion, two-year spending plan that Malloy offered on Feb. 18.
The Democrat-controlled panel has not hidden the fact it is exploring numerous options to move operating funds outside of the cap in hopes of reversing the worst of the cuts to social services, health care and higher education proposed by the governor.
This shouldn’t come as any surprise, Walker and Bye said, to anyone who has watched the Capitol during the past decade.
That’s because the cap, which was developed in 1991 to temper voter outrage over the state income tax enacted that same year, is part of a larger problem that is squeezing key government services.
Designed to keep spending increases in line with personal income growth, the cap system cannot keep pace with required payments for workers’ retirement benefits. After failing to save properly for decades, Connecticut began to feel the weight of its long-term obligations badly by the mid-2000s.
For example, the cap allows less than 3 percent overall spending growth next fiscal year. But the payments to the state employees’ pension and retirement health care programs jump 13 percent and 18 percent, respectively.
Cap system crippled for a decade
The 2005 session marked the first time in cap history lawmakers approved a budget that exceeded the cap right from the start.
The governor and legislature can exceed the cap legally if they agree and take special steps.
That happened in 2005 when Gov. M. Jodi Rell, a Republican, signed a declaration of fiscal exigency — declaring a budget emergency. And more than 60 percent of the Democrat-controlled House and Senate voted to approve the plan.
That two-year budget, which burst the cap by $371 million in the 2005-06 fiscal year, enabled Connecticut to secure major new federal aid for nursing homes and community-based social services.
Two years later, Rell and lawmakers used the same approach, this time approving a biennial budget that shattered the cap by a record-setting $690 million in the first year. This was done to launch two major initiatives: Rell’s proposal to dramatically boost local education aid, and a Democratic push to expand health care access for the poor.
Since taking office four years ago, Malloy has refused to declare a budget emergency while repeatedly professing his allegiance to the cap.
Malloy repeatedly sought cap relief
But that doesn’t mean he hasn’t bent to the cap’s weight. Malloy, who forced the legislature to increase pension savings starting in 2012, has felt more pressure than Rell did.
But while he has refused to exceed the cap legally, he has proposed or approved moving spending outside of the cap – in large quantities, including:
- Redirecting $78 million owed to charter schools to cities and towns, which then forwarded the funds to the charter schools. Since state aid to poor municipalities is cap exempt, almost 60 percent, about $45 million, moved outside of the cap.
- Moving a federally funded health care program for poor adults outside of the budget reduced spending under the cap by $446 million in the 2013-14 fiscal year. Lawmakers proposed this change and Malloy signed it into law.
- Borrowing $86 million per year to fund municipal aid increases. Borrowed funds are outside of the budget. Otherwise grants given to all but the poorest communities, would have counted against the cap.
- Proposing that $60 million in revenues in 2014-15 be intercepted before technically being recorded in the budget — and counted against the cap — and spending them off budget instead to support the state university system. The legislature declined to adopt this proposal.
And even in his latest, two-year budget proposal, the governor ran into more cap troubles.
Malloy admitted his plan exceeds the cap by $55 million next fiscal year, but blamed the error on faulty data provided by a data collection vendor. Still, the plan would have overshot the cap by another $48 million had not the governor proposed another revenue “intercept.”
Governor, GOP, push for cap compliance
Malloy launched his own push Thursday in hopes of dissuading the Appropriations Committee from trying to circumvent the cap.
During an appearance on WTIC-AM 1080, the governor told host Ray Dunaway that lawmakers “are having a hard time wrapping their minds around the rules.
“There’s a spending cap,” Malloy added. “… If we had a half-billion dollars more money, we can’t spend a half-billion dollars more money. So they’ve got to get used to the idea.”
“There’s no doubt this governor has exceeded the spending cap,” Senate Minority Leader Len Fasano, R-North Haven, said this week, adding that acknowledging the trend of cap circumvention is no reason to perpetuate it. “Let’s finally start talking about cutting government.”
“What the Governor has proposed is not balanced, relies on millions in new revenues and violates the state constitutional spending cap,” said House Minority Leader Themis Klarides, R-Derby. “Calling it a budget is being charitable.”
Since last November’s election, Republicans gained enough seats in the House and Senate to block any effort to legally exceed the cap. And both Fasano and Klarides have said their caucuses would do just that if necessary.
A cap double standard?
But that wasn’t always the case. The biennial budget that covered the 2007-08 and 2008-09 fiscal years during the Rell administration – and that topped the cap by $690 million in the first year – was adopted with overwhelming Republican support.
Klarides was one of 42 House Republicans who voted for that budget – with no opposing GOP votes.
In the Senate, only one of the nine Republicans present voted against the budget. Fasano voted for it.
Fiscal times were much better then, and that plan was bolstering state aid in every lawmakers’ district without raising taxes.
Yet Walker and Bye ask how their critics, from both parties, still can say there is no choice but to submit to the cap when they themselves have blazed numerous trails out from under it for so many years?
Neither Walker nor Bye would identify any of their critics by name, but said the contradictions are clear.
“It is posturing to me,” Walker said. “We are trying our best to do our job. It is all very frustrating.”
Bye added that neither she nor Walker issued warnings or set conditions to others in advance of their budget proposals.
“We are still in process,” she said, “and we are not getting the same respect.”