Struggle to balance current budget could help with future deficits
While legislators and Gov. Dannel P. Malloy scramble to close yet another hole in the current state budget, the exercise could help them solve a much larger problem.
Depending on how they solve this fiscal year’s $220 million deficit — a task lawmakers say they will complete next Tuesday — the $900 million hole built into 2016-17 finances could be whittled down by nearly one-quarter.
And while the Senate chair of the Appropriations Committee said her panel still has to identify several hundred million dollars in reductions to balance the next budget, she also warned that no programs or initiatives — including the governor’s and legislative leaders’ top priorities — are immune from potential cuts.
“We will have a balanced budget by the end of the session,” Sen. Beth Bye, D-West Hartford, told The Mirror last week. “But I make no assumptions. … I don’t think anyone anticipates what the final product will be.”
Bye and her Democratic colleagues on the Appropriations Committee are doing double-duty, both crafting their revisions to 2016-17 spending and developing options to fix this year’s problem.
Sources close to the process said Tuesday that the Appropriations Committee was seeking a one-week extension from its March 31 deadline to complete its work on the 2016-17 budget.
Though Bye said her colleagues in the Democratic majority continue to prioritize education, health care, municipal aid and assistance for the needy, the bipartisan opposition to tax hikes — coupled with surging fixed costs and limited economic growth — will take a toll not seen in recent history on the next state budget.
Deficits keep getting worse
“We’re taking this one step at a time,” Bye said. “It’s a complicated process, and our tools are very limited this time.”
As part of Connecticut’s biennial budgeting process, legislators and Malloy last June crafted a spending plan for the current fiscal year, and a preliminary one for the year that begins this July.
But by November it had become clear that tax revenues — and income tax receipts in particular — would fall short of expectations.
And even after a special session in December adopted deficit-mitigation cuts, new revenue reports in January and February continued to pull back expectations for income tax receipts.
Not only does the preliminary budget for 2016-17 face a built-in General Fund deficit of $908 million — or about 5 percent of annual operating costs — but Malloy’s revised plan fell $339 million into the red on Feb. 25, three weeks after it was issued, when revenue projections were updated.
Bye said last week her panel still was working to find the $570 million in cuts needed to bring the original 2016-17 budget down to Malloy’s bottom line — which still would leave them almost $340 million in the red.
With legislators up for re-election this year, and majority Democrats already feeling the heat for ordering a biennial tax hike last June worth $1.3 billion, leaders from both parties insist tax hikes won’t be considered.
‘Nothing’s immune’ from cuts
“We really are in unusual territory,” Bye said of the swelling deficits. Given that, and the consensus on tax increases, “I can’t say anything is off the table” in terms of spending reductions.
But spending cuts also are a problem politically, especially in an election year.
Democrats are campaigning on a new initiative to share sales tax receipts with cities and towns — even though projected deficits over the next few years dwarf the cost of the revenue-sharing program.
Republicans already charge that this promise will be scaled back at best, or abandoned at worst, after the election, and municipal leaders from both parties have been openly skeptical their communities will see the funds.
Legislators and Malloy already failed to make the first $70 million deposit of sales tax receipts into a holding fund for the revenue-sharing program.
About $30 million more is supposed to be deposited before June 30, and $220 million is owed in 2016-17.
Similarly, sales tax receipts are being used to fuel one of the biggest initiatives of Malloy’s second term: transportation.
Revenues dedicated to transportation are supposed to grow by almost $100 million next fiscal year.
Are the revenue-sharing and transportation programs immune from cuts?
“Nothing’s immune,” Bye said.
This year’s fix could hint at 2016-17 cuts
Republican legislators haven’t committed to offering their own plan to fix the next state budget.
They did propose about $180 million in spending cuts and about $40 million in transfers and sweeps of miscellaneous funds to fix the smaller, $220 million deficit in the current budget. That means most of the Republican cuts this fiscal year also could be continued in the next budget, thereby whittling down the larger deficit.
The GOP plan would furlough all state workers for two days — which would require negotiations with employee unions — reduce legislators’ pay, eliminate posts in Malloy’s administration and reduce spending for education, social services and other programs to balance state finances by June 30.
Though Bye did not comment on specific components of the GOP plan, she said Democrats share one goal with the Republicans: They want cuts that save money both this fiscal year and next.
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