Connecticut got its first look — albeit behind-the-scenes — at a nontraditional political alliance last week.
Gov. Dannel P. Malloy and Senate Republican leader Len Fasano teamed up to block some last-minute spending changes until the full legislature and administration can adopt a plan to cover the current budget deficit.
After absorbing downgrades from three credit-rating agencies in four business days earlier this month, Connecticut can’t afford to give deficit-mitigation efforts low priority, Fasano told The Mirror on Monday.
“It’s irresponsible,” he said. “And if people think all of Wall Street is not watching us, they are simply naive — dangerously naive.”
Over the course of four business days between May 12 and 17, Connecticut’s bond rating was downgraded by Moody’s Investors Service, Fitch Ratings Inc. and by S&P Global Ratings. The state has sustained six downgrades among these three agencies and Kroll Bond Rating Agency over the past 12 months.
“In light of our current economic reality and the recent response Connecticut received from all four credit rating agencies, it is hard to justify any reason to postpone taking immediate action to bring this fiscal year into balance,” Malloy wrote Tuesday morning in a letter to legislators. “Further, concluding this business will allow us to focus fully on arriving at a balanced biennial budget. We ask you to act responsibly on this matter and to pass both a deficiency bill and a deficit mitigation package without delay.”
At first glance, the issue is centered on the “deficiency bill,” a largely technical measure enacted annually to resolve projected overspending by agencies and departments in the final weeks of the fiscal year.
Legislators from both parties had developed a plan to cover additional spending needs totaling about $19.5 million, including:
- $7.6 million for the Department of Developmental Services;
- $7.1 million for the Office of Early Childhood, with most of those funds needed for the Birth-to-Three program;
- $4.0 million for the Public Defender Services Commission;
- $500,000 for the Department of Public Safety and Emergency Services;
- $300,000 for the Office of the Chief Medical Examiner.
To cover these needs, lawmakers would redirect $19.5 million in projected surplus funds from a fringe benefits account.
But while this measure wouldn’t worsen the overall deficit in the current fiscal year, it lacked any plan to cover the shortfall — something traditionally included in the deficiency bill whenever a net deficit is projected.
The regular legislative session ends on June 7, and Malloy forwarded a plan to cover the deficit three weeks ago.
“If we continue to say ‘don’t worry about it’ and we continue to spend without showing we care about balancing the budget, we are sending a message we are fiscally careless,” Fasano said.
Malloy unveiled a plan on May 10 to close a gap estimated at $390 million, or a little more than 2 percent of the General Fund.
The governor has limited statutory authority to reduce spending unilaterally, and he used rescissions to reduce the projected shortfall over the past two weeks to $323 million.
Malloy asked lawmakers to take several other steps, including:
- Withholding $19.4 million in casino proceeds scheduled to be shared with cities and towns;
- Cutting $2 million in supplemental payments owed to hospitals;
- And ordering a series of one-time revenue sweeps. Included within that is about $1 million in total funding earmarked for 18 state parks.
These steps, if approved, would bring the deficit close to about $235 million. Connecticut then could cover the rest, under Malloy’s plan, by draining nearly all of its emergency reserve, commonly known as the rainy day fund.
Senate Republicans developed an alternate plan to preserve funding for towns, hospitals and state parks, relying largely on additional fund sweeps to do so.
Still, the House of Representatives unanimously approved a deficiency bill Thursday without deficit-mitigation measures attached.
The bill was supposed to run Thursday night in the Senate. Democrats and Republicans are split 18-18 there, but Lt. Gov. Nancy Wyman, who can cast a tie-breaking vote, gives Democrats an edge.
Still, Fasano invited the Malloy administration to offer adjustments to the Senate GOP deficit-mitigation plan, and then prepared to tack that on as an amendment to the deficiency bill.
The Senate Republican leader was optimistic his plan would have enjoyed support from Wyman. And while the lieutenant governor’s statement Friday did not say specifically how she would have voted, it implied Wyman would support Fasano’s position.
“We’ve got to do what’s best for Connecticut taxpayers,” Wyman said. “Building a responsible, sustainable budget requires us to put partisanship aside. What happened in the House was surprising—I encourage the Senate to run deficit mitigation and deficiency plans together.”
Senate President Pro Tem Martin M. Looney, D-New Haven, said he’s optimistic that all caucuses and the governor’s office can reach agreement on a deficit-mitigation plan by the close of business Tuesday — optimism echoed by House Speaker Joe Aresimowicz, D-Berlin, and House Minority Leader Themis Klarides, R-Derby.
All three leaders said deficit-mitigation remains a priority, but they didn’t want to hold up the deficiency measure since legislators from both parties are concerned about the Birth-to-Three program.
“I think there is a good chance we can come to an agreement,” Klarides said. “As long as all of the goals (covering deficiencies and deficit-mitigation) are achieved in a reasonable amount of time, then that is acceptable.”
But Aresimowicz said, “It’s unfortunate that Senator Fasano spends more time complaining on how the process went than finding solutions,” adding that he agrees with Klarides that all issues will be resolved soon.