The Senate voted early Friday morning to rebalance Connecticut’s credit card in the face of shrinking tax revenues, canceling or delaying about $1 billion in financing for a wide array of projects and programs.
Outside of this rebalancing process, the bond package for the 2016-17 fiscal year also authorizes $382 million in new borrowing for municipal school construction, down significantly from financing for local schools approved in recent years.
The Senate enacted the measure 34-2. It now heads to the House of Representatives, which is expected to consider the bill Friday.
Credit card limit shrinks along with tax revenues
The cancellations affect capital projects at public colleges and universities, municipal school districts, economic development programs, social services, housing, recreation and the environment, transportation, and numerous state facilities and information technology systems.
“Given our fiscal situation with declining revenues, we’ve had to rethink how we work,” said Sen. Carlo Leone, D-Stamford, who called the measure “a bonding package we can all support and be proud of.”
Leone, who is co-chair of the bonding subcommittee on the Finance Revenue and Bonding Committee, said legislators tried to focus on projects that have languished on the books “to make way for projects that need to happen now.”
Sen. Michael McLachlan of Danbury, the ranking GOP senator on the bonding subcommittee, praised legislators and state agencies for cooperating to reduce state borrowing.
“I think there has been some strategic planning,” he said, citing the University of Connecticut in particular for its willingness to defer some capital projects.
Legislators and Gov. Dannel P. Malloy faced this exercise this year because of an economy and tax system that continues to grow very modestly and a statutory cap the state sets on the general obligation bonds it sells on Wall Street.
General obligation bonds are repaid with resources from the state budget’s General Fund. This fund includes income, sales and corporation tax receipts, funds generated by several other minor taxes, gaming proceeds, several categories of federal grants, and revenues from various fees. The bulk of transportation improvements are financed with a different type of bonding and paid off with fuel tax receipts.
Under this capping system, the amount of financing the legislature can authorize is limited by Connecticut’s revenues. And when those revenues shrink, so does the borrowing limit.
For example, the state income tax, which funds roughly half of the annual budget, is projected to raise about $9.3 billion this fiscal year — about $500 million less than the legislature and Malloy’s administration originally anticipated.
That means Connecticut has to cancel $642 million in previously approved bonding.
And because the governor and legislature want to add about $359 million in financing for new initiatives, that means the total that must be canceled to bring Connecticut under its bonding cap is $1 billion.
This isn’t the first time Connecticut has had to cancel items it was planning to put on its credit card, though legislators say this round of purging is the worst in recent history.
The state had two other major bond cancelations in recent years, pulling back $441.9 million in 2011 and $206.9 million in 2008.
Not all of the canceled bonding authorizations had been likely to be funded, even if revenues had not fallen. The State Bond Commission — a panel led by the governor and his budget office — must approve projects before financing can be secured, and the commission typically endorses only a portion of the priorities selected by the legislature.
Board of Regents’ system hit harder than UConn
About $81 million in financing for UConn and for the state’s other university system, governed by the Board of Regents, was pushed back one fiscal year and won’t be available until 2017-18.
Another $34.3 million earmarked for the four regional state universities, the community colleges and the Board of Regents that administers them, was canceled.
The university trustees voted last month to delay the repairs to Gampel Pavilion for a year — a decision made after outside consultants determined doing so would not put the safety of the public at risk. The pavilion, home to UConn’s championship basketball team and the site for student graduation ceremonies, has a flaking and leaking dome that was slated to be renovated at a cost of $10 million.
In addition to Gampel, the $158.4 million renovation of the largest building on campus – the Gant Science Complex – would be put off, as would the $27.8 million renovation to the Fine Arts Complex, and a $4 million update to the sewage system to better remove fats and oils.
Scott Jordan, UConn’s chief financial officer, said the renovations to the Fine Arts and Gant Science complexes would take priority over the work on the sewage system and Gampel roof when money becomes available.
Gant is “the centerpiece” of Next Generation, the multi-billion construction plan approved by the legislature in 2013 to increase enrollment by 6,000 students in degrees related to science, technology, engineering and math, known as the STEM fields, Jordan said.
The Board of Regents’ system, which includes the four regional state universities and the 12 community colleges, lost more funding than UConn did — but it could have been worse.
The bonding subcommittee originally recommended canceling or delaying a combination of $110 million in bonding, rather than the roughly $90 million that was targeted in the bill.
Many agencies lost financing
Other bonding canceled in the bill includes:
- $141 million for Department of Energy and Environmental Protection and the Department of Public Health, including funds for clean-water projects, emergency services, stem cell research, bikeways and trails and numerous community based projects.
- $80 million for the Department of Economic and Community Development, including grants for small businesses, manufacturing assistance, pollution abatement and aid to more than a dozen tourism destinations and regional economic development and tourism marketing groups.
- $51 million for the Department of Housing was canceled, including $15 million from the Flexible Housing Program, which is used to encourage home ownership in Connecticut’s poor urban centers. Funds also were cut from homelessness prevention programs and a low-interest loan initiative to help retrofit homes in shoreline flood zones.
- $39 million to the Department of Administrative Services for various state building maintenance projects.
- $30 million to repair or upgrade technology in existing schools in the state’s lowest-performing districts.
- $36 million previously earmarked for quasi-public economic development agencies.
- $27 million earmarked for the Judicial Branch, primarily for for facility upgrades and improvements.
- $25 million earmarked for the state’s bioscience initiative, centered around The Jackson Laboratory and the UConn Health Center in Farmington.
- $17 million in general obligation bonds for rail and port improvements and for general highway pothole repair.
- $12 million for the Department on Developmental Disabilities. One third would have involved grants to community-based nonprofits and the other two-thirds would have come from improvements to regional facilities.
- $11 million for the Department of Children and Families. Most of those funds have gone toward grants to community-based nonprofits and to group homes, which the agency is increasingly relying on as it downsizes the number of facilities it runs.
- $9 million from the Department of Social Services, including funds slated for elderly centers and other neighborhood facilities.
Some new borrowing approved
The measure does give the green light to expand borrowing in a few areas.
The biggest new item was $181 million for a major renovation of the State Office Building. One of state government’s largest suite of offices, the State Office Building is located near the Capitol, across Capitol Avenue from The Bushnell.
Another large new item is $60 million to design and construct a new heating and cooling system for the York Correctional Institution in East Lyme.
And $20 million in new bonding was authorized for supporting housing for the intellectually disabled and for individuals with autism.
Lean municipal school bonding plan approved
The school construction financing includes $365 million for new projects and about $16 million in additional funds for previously approved work.
The $365 million earmarked for new construction represents just over half of the $518.8 million recommended for local school construction by the legislature’s School Construction Project Priority List Review Committee and by the Department of Administrations Services.
Among the new projects approved for school construction are:
- $76 million in state funding for Stratford High School;
- $65 million for The Whitney School in Hamden;
- $31 million for Danbury High School;
- $29 million for a middle school in Colchester, and smaller projects in Newington, Norwalk, Stonington and Wilton.
Construction projects recommended by the legislative panel and by the Department of Administrative Services that were not included in the bill involve:
- Martin Luther King School in Hartford, which city officials has already said they may close because of lack of funding.
- And the magnet at New London High School.