Deep cuts expected in budget plan today, but deficit may remain
The legislature’s Appropriations Committee is expected to approve a plan for the upcoming fiscal year that imposes some of the deepest cuts in recent history — but still could be more than $300 million out of balance.
And while leaders of the Democrat-controlled committee wouldn’t discuss specifics of plan for 2016-17, both predicted cuts to social services, health care and other top priorities would spark considerable public outcry.
Sources familiar with the committee budget said it would fall very close to the $19.9 billion bottom line Gov. Dannel P. Malloy recommended in February.
The governor’s proposal for the General Fund — which covers the bulk of annual operating costs — fell $570 million below the preliminary 2016-17 budget legislators enacted last June.
And that first draft — which is now more than $900 million out of balance — already had slashed General Fund spending $888 million below the mark nonpartisan analysts said was needed to maintain current services.
The cumulative reduction in the new committee plan approaches $1.46 billion below the current services level.
That’s even more painful than in May 2011, when Malloy and legislators closed one of the largest deficits in state history. Their solution, which also included tax increases, fixed General Fund spending at $1.36 billion below the current services level.
But that plan benefitted from union concessions, which provided half of the necessary general fund savings. This time around union leaders say workers, who also provided concessions in 2009, won’t grant them again.
That means most of the reductions will fall upon programs.
“There are some really tough cuts here,” Sen. Beth Bye, D-West Hartford, co-chair of the Appropriations Committee, said Tuesday. “People are not going to be happy.
Rep. Toni Walker, D-New Haven, said the panel has tried to make the best of a bad situation. “There is nothing really good here,” she said. “Is this going to be received with some anger? Yes, but it’s a responsible plan.”
Though the co-chairs didn’t identify specific cuts, committee members have said privately that their plan would incorporate many of the emergency reductions ordered by Malloy and by the legislature in recent deficit-mitigation plans.
The majority of those cuts fell on segments of the budget not fixed by contract, including health care, social services and higher education.
Despite all of the emergency reductions over the last year-and-a-half, Walker said few lawmakers realize the full toll it has taken on programs for those most in need. “I don’t think people realize how much we’ve taken,” she said. “People are listening to the revenue numbers more than they are looking at the reductions.”
Legislators and the governor have struggled with increasing budget deficits since 2014. Debt costs — particularly tied to unfunded pension and other retirement benefit programs — continue to grow rapidly while anticipated growth in state income tax receipts has vanished.
While state analysts projected two years ago that the income tax would yield $10.3 billion by the 2016-17 fiscal year, they now expect less than $9.5 billion.
The latter problem hit Malloy’s budget proposal for 2016-17 just a few weeks after the governor submitted it on Feb. 3.
By Feb. 25, the nonpartisan Office of Fiscal Analysis had downgraded projected revenues by almost $340 million below the level Malloy was counting on to balance his plan.
So if the Appropriations Committee matches the governor’s bottom line, its plan also will be in the red by the same amount.
Connecticut does have enough money in its emergency reserve, commonly known as the rainy day fund, to cover this difference. The fund currently holds $406 million.
But at least some of those dollars might be needed to balance the current fiscal year before it ends on June 30.
Although the budget is projected to be in balance right now, analysts will reassess income tax projections about two weeks after the April 18 income tax filing deadline.
The governor, many legislators and state Comptroller Kevin P. Lembo all have warned that revenue projections might well be downgraded again after this review.
“My greatest concern continues to be further erosion in General Fund revenue through the final months of fiscal year 2016, Lembo said last week. “… Connecticut’s economy continues to experience moderate growth, but is falling short of the growth required to support original budget estimates.”
And that late April revenue assessment also could lead analysts to downgrade the level of tax receipts available to support the 2016-17 budget.
In that event, both the governor’s plan and the committee budget for next fiscal year would be in even worse shape.
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