Outspoken state budget chief welcomes job with tighter focus
Ben Barnes begins a new job this month overseeing the finances for 17 state colleges and universities, an enormous system in transition due to shrinking enrollment and lean state budget support.
Still, Barnes welcomes a job with a narrower focus, relatively speaking, from his last one.
The new chief financial officer for the Board of Regents for Higher Education spent the past eight years grappling with finances for all of state government. His office implemented two mammoth-sized labor concessions deals and took the first steps toward stabilizing a state pension crisis of historic proportions.
Though the OPM chief commonly is referred to as state budget director, managing finances is just one part of the job description. The office also is the chief policy development and planning agency for the Executive Branch and handles the bulk of labor relations for state government.
“My role is going to be smaller in ways that I actually kind of welcome, trying to make this system work better,” Barnes, 50, told the CT Mirror during a late December interview as he wrapped up his duties as secretary of the Office of Policy and Management for Gov. Dannel P. Malloy. “Actually it’s kind of refreshing to me. It’s a little wearing, the responsibility to have that big picture view all of the time.
Paying the bills that others would not
It was Connecticut’s poorly funded retirement benefit programs that came crashing down on the state finances — and on Barnes — like a lead balloon.
Pension contributions that totaled $1.1 billion per year — or 6 percent of the General Fund — before Malloy took office, swelled to $2.5 billion, or 13 percent, before he left.
Barnes ranks paying the full bill — billions of dollars more than past administrations would cover — as one of the administration’s proudest accomplishments. And so does dramatically boosting public awareness of the problem.
“Before us, I think nobody really understood what was going on here,” he said. “Things were getting worse without anybody seeing it coming, or anybody understanding that we should be making moves to deal with this.”
Labor concessions deals in 2011 and 2017 would reduce long-term obligations to the state employees’ pension by billions of dollars. The administration also worked with unions to restructure payments, shifting some of the pension debt it inherited until after 2032.
Connecticut still faces some hefty payments in this area for decades to come, but the problem is more manageable and predictable.
Barnes also spent considerable time researching options to stabilize the equally-cash-starved teachers’ pension. Contributions owed to this fund are set to spike between now and the early 2030s.
And while legal restrictions don’t allow Connecticut to restructure and smooth out payments into this fund until the mid-2020s, Barnes said the Malloy administration covered its share of the bill. “I think we laid the groundwork for change,” he said.
Getting Medicaid under control
While he was grappling with the state’s pension problem, Barnes also was working with Department of Social Services’ officials to get a handle on another huge chunk of the budget — Medicaid.
A nearly $3 billion line item in the budget, Medicaid costs per patient are relatively flat. In the decade before the Malloy administration, annual increases in the 5 to 7 percent range were common.
“It’s one of the things that makes or breaks you, but it hasn’t been breaking us,” Barnes said. “It’s a big expensive thing, but the growth in Medicaid is not a problem for us the way it’s been in other states.”
The Malloy administration did absorb some initial, large cost increases in its first couple of years as Connecticut implemented the federal Affordable Care Act — which dramatically expanded Medicaid client rolls.
But a willingness to bear those costs in the short-term, coupled with a wide array of managed care initiatives, lead to a more stable program — and a healthier population.
“When you start treating someone with diabetes more effectively, does it save you a lot of money this year?” Barnes said. “No, probably not, because you have to pay some nurse to go out and work with them and get them on a whole new regimen and change their diet. The idea is that those interventions will make them healthier and your costs for the next 20 years are going to be lower, but you’re putting in some upfront costs.”
Candid budget talk …
Despite getting Medicaid under control, Barnes and Malloy would struggle often with budget deficits as Connecticut’s economy recovered slowly from the recession of 2008-2010. That often meant reducing other agencies’ requests for dollars.
Now the roles are reversed and, as CFO for the regents’ system, it will be Barnes’ turn to plead for funding.
“I get that,” he said, chuckling at the prospect that other agency heads might consider it fiscal karma. “I will be happy to complain to OPM if that’s what they want me to do.”
Still, Barnes is widely respected throughout the Capitol for the expertise he brought to the job, even when he had to deliver unwelcome news.
“His knowledge of the budget and his ability to grasp the nuances were absolutely amazing,” said House Speaker Joe Aresimowicz, D-Berlin, adding that Barnes supported his positions with data — and not with rhetoric. “I always understood his role, but the facts were the facts and the numbers were the numbers. I appreciated that.”
“There wasn’t a question that he couldn’t answer,” said Rep. Jason Rojas, D-East Hartford, co-chair of the tax-writing Finance, Revenue and Bonding Committee. “When we negotiated the budget he always had the details of any policy at his fingertips.”
Rojas also said he appreciated Barnes’ candor, sometimes a rare commodity at the Capitol.
“People appreciate it when you are honest with them,” he said. “They are tired of the BS.”
During the early years of the Malloy administration, Barnes repeatedly engaged in politically-sensitive, high-profile fights over proposed cuts to state watchdog agencies that represented the tiniest of fractions of the overall state budget.
For example, a proposal that the watchdog agencies share attorneys during a time of budget deficits did not go over well.
“That was not the easiest period, … and I thought an all-hands-on-deck approach might be a good thing, but no,” Barnes said. “I probably should have realized this was an area where the cost savings aren’t worth it. Shame on me for not seeing that coming.”
… But maybe, sometimes too candid?
Still, Barnes also was recognized as one of the most publicly accessible — and candid — state budget directors, despite having bad news to deliver.
Barnes made headlines in November 2014, when he told Capitol reporters. “We have entered into a period of permanent fiscal crisis in state and local government, it seems.”
The statement was a face full of cold water to an electorate who, a few days earlier, had re-elected Malloy amidst assurances that state finances would be deficit-free.
In Barnes’ defense, many news media left out the second half of his statement: “But that said, I think that we’ve made a lot of progress in trying to find ways to make our government more sustainable.”
“It aggravates me, but I’m over it — sort of,” Barnes quipped four years later.
That wouldn’t be the only time he made Malloy roll his eyes with his outspokenness, nor the last time he would make a tense relationship even more tense.
When asked by legislators during a February 2015 hearing why the administration was recommending higher taxes for hospitals, Barnes replied: “Why do you rob banks? It’s where the money is.”
The Malloy administration sparred frequently with the hospitals, arguing the industry was unfairly claiming poverty despite gaining revenue due to the Medicaid expansion as a way of justifying criticism for dramatically hiking taxes on hospitals.
“He has one hell of a sense of humor, understated and dry — a little bit like mine,” Malloy said. “Maybe that’s one of the reasons we got along so well.”
Always Malloy’s first choice
Some were surprised in December 2010 when Malloy went outside of Capitol political circles to tap Barnes — the chief operating officer for the Bridgeport public schools — to serve as his budget director.
Barnes wasn’t a stranger to Malloy. Raised in St. Petersburg, Fla., Barnes had spent most of the previous two decades connected to municipal government, first as a policy expert for the Connecticut Conference of Municipalities, and also holding three posts under Malloy when he was mayor of Stamford.
Still, the governor was inheriting a budget deficit of historic portions, an empty budget reserve, $1 billion in operating debt, and a sluggish economy. But despite the stakes, Malloy said the choice for OPM secretary was never in doubt.
“I knew before I had won the election who I would fill the position with,” the former governor said. “He’s as bright as the day is long. He not only understands things really well, he can communicate that understanding to other people. He did an unbelievable job.”
Barnes and Malloy also faced a new political dynamic, a legislature that shifted responsibility for selecting budget cuts — involving hundreds of millions of dollars annually — to the Executive Branch.
Shifting responsibility for budget cuts
Rather than reduce specific programs — and take the political heat that comes with this — legislators increasingly directed Barnes’ office to achieve nebulously-defined savings targets.
This would require the administration to withhold funding from agencies, freeze hiring and reduce programs, after which lawmakers would issue a bipartisan barrage of public condemnations.
“We’d try to cut $1 billion the old-fashioned way, but then we’d get beaten up,” Barnes said, referring to program reductions recommended each February in the governor’s annual budget proposal.
And though lawmakers would neither approve the governor’s cuts nor recommend their own, Malloy was committed to shrinking government nonetheless.
“The governor offered to them: If you can’t make the decision, I will make the decision,” he said.
Barnes did offer a word of caution, saying it wouldn’t be wise to stick with this approach because Connecticut would continue to face hard fiscal choices over the next decade and, sooner or later, legislators need to get better at making them.
There is only so much savings to be found by trimming staff and making programs more efficient, he added. Eventually, some programs might need to be dropped.
The recent, increased reliance on these savings-targets rather than specific cuts “is not a great way to govern, and there’s no question there is a political sort of pattern that’s developed,” Barnes said. “But there are still some folks who understand. … Sometimes you have to say ‘this is what we can afford and this is what we’ve got to do.’”