To find some of the money to reverse cuts to a popular social services program, the legislature is expected Monday to raid $17.8 million owed to next fiscal year’s state budget — which already is at risk of a significant deficit.

According to the bill lawmakers are scheduled to vote on in special session, the General Assembly also would make changes to the state’s contribution to the teachers’ pension — changes that could worsen this fiscal year’s budget deficit and spark a legal debate as well.

The measure, filed online, also would cut funds for executive appointments, miscellaneous expenses and for the Department for Administrative Services.

“At first blush, this doesn’t look promising for those at home rooting for achievable savings and containing the deficit,” Kelly Donnelly, spokeswoman for Gov. Dannel P. Malloy, said Thursday. “With that said, we’ll review the proposal in further detail over the coming days.”

The Democratic and Republican caucuses in the House and Senate did not comment when initially approached Thursday evening.

To reverse new eligibility restrictions for the Medicare Savings Program, which uses Medicaid funds to pay medical expenses that Medicare doesn’t cover for poor seniors and the disabled, legislators needed to find about $54 million this fiscal year. Estimates are those restrictions, if not reversed, could eliminate or reduce benefits for as many as 113,000 residents.

Creating a deficit next year to fund services now

One place they looked: next fiscal year’s finances.

When the General Assembly adopted the new, biennial budget in late October, it relied on a commonly used technique to achieve balance in both years.

As the plan was being designed, there were extra funds in the first year and too few in the second. To resolve this problem, the budget stipulates that $17.8 million in funds from the current fiscal year be carried forward into 2018-19.

But now, to find about $54 million for the Medicare Savings Program, lawmakers would cancel that transfer, leaving 2018-19 finances $17.8 million shy.

Further complicating matters, the legislature’s nonpartisan Office of Fiscal Analysis and the Malloy administration warned in November that tax receipts and other state revenues in the 2018-19 fiscal year already are projected to fall $150 million short of the level anticipated in the budget.

The legislature originally was scheduled to act in special session on Thursday, but postponed meeting until Friday — and then again until Monday — because of inclement weather.

Double-counting the teachers’ pension savings?

The plan to restore funds for the social services program also could exacerbate a $224 million deficit projected for the current fiscal year, by again altering how the state budgets for teachers’ pensions.

Connecticut has been restricted somewhat in this area since 2008, when it borrowed $2 billion by issuing bonds with a 25-year life, to bolster the cash-starved pension program.

The state promised in the bond covenant, its contract with investors, that it would appropriate the full contribution recommended by pension fund analysts each year in the state budget — something Connecticut often failed to do for decades beforehand.

But this year, legislators tried to work around that. They ordered teachers to contribute an extra $19.4 million this fiscal year.

The new budget technically does report the full state contribution that fund analysts recommended: $1.29 billion.

But it also directs the governor to achieve hundreds of millions of dollars in savings in a variety of agencies and programs across state government. Baked into that omnibus savings target is an assumption that $19.4 million of the $1.29 billion state contribution listed in budget won’t actually be placed in the pension fund.

In other words, the budget technically appropriates a $1.29 billion state contribution for teachers’ pensions, but actually delivers that amount minus the $19.4 million extra teachers must kick in.

State Treasurer Denise L. Nappier decried this accounting maneuver, saying what legislators believe to be a loophole may or may not violate the letter of the bond covenant, but clearly violates the spirit.

But to find more resources for the Medicare Savings Program, the legislature is expected to vote Friday to officially reduce the teacher pension contribution line item by $19.4 million — even though it already assumed that savings elsewhere in the budget.

The final $17.3 million earmarked in the bill to reverse cutbacks to the social services program would come from reductions to accounts for executive appointments, miscellaneous agency expenses and from the Department of Administrative Services.

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Keith M. PhaneufState Budget Reporter

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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