State budget relies on $180 M in tax receipts beyond projections

Connecticut legislators and governors banned what critics called “wishful budgeting” nearly a decade ago.

After Gov. M. Jodi Rell proposed a budget in 2009 that massively downplayed the coming recession — and was an unprecedented $2.7 billion out of balance according to one report — lawmakers overhauled the budget-making process.

Simply put, if analysts weren’t ready to project revenue growth in writing,  elected officials couldn’t gamble and spend it anyway.

But that was then.

The new $43.4 billion, two-year plan awaiting Gov. Ned Lamont’s signature assumes $180 million in income tax receipts that neither Lamont’s analysts — nor the legislature’s — projected in their last joint forecast.

And while Democratic legislative leaders are defending the move, citing initial signs of new economic growth, Republicans say this is exactly the type of reckless fiscal gimmick the Democratic governor had vowed to avoid.

“I think it’s dangerous and it puts this state in fiscal jeopardy,” said Senate Minority Leader Len Fasano, R-North Haven. “I think what really happened here was they [Democratic legislators and Lamont] were short $180 million and they created false additional income to balance the budget.”

The last revenue forecast signed jointly by Lamont’s budget office and by the legislature’s nonpartisan Office of Fiscal Analysis (OFA,) issued April 30, assumes state income tax receipts from paycheck withholding will grow by 4 percent in each of the next two fiscal years.

The adopted budget assumes 5.5 percent growth in each year, adding $90 million annually or $180 million over the biennium.

Fasano asked how Lamont, whose administration negotiated the new budget with Democratic legislative leaders, reconciles that move with a pledge the new governor issued in his first address to the legislature on Jan. 9.

“I want to be clear – no more funny math or budgetary gamesmanship,” Lamont said during his first day on the job. “I come from the world of small business where the numbers have to add up at the end of the month or the lights go out.”

To this, Fasano quipped “It’s getting pretty dark in Connecticut.”

Lamont’s budget agency, the Office of Policy and Management (OPM,) declined to comment Monday.

But Democratic leaders said their budget is a far cry from what Rell, a Republican, tried a decade ago.

As Connecticut slipped into the Great Recession in February 2009, Rell infuriated Democratic legislators be proposing a budget based on revenue estimates from the previous November. Her own budget director, Robert Genuario, had made public statements as late as January 2009 indicating the November forecast was no longer was reliable, and that the revenue outlook had gotten significantly worse.

To force Rell to acknowledge the problem, the Democrat-controlled legislature enacted a law — overriding a Rell veto in the process — creating “consensus revenue” reporting.

Three times a year — on Nov. 10, Jan. 15 and April 30 — analysts for the executive and legislative branches must craft new projections for tax receipts and other revenues. If they can’t agree, the state comptroller must resolve any differences.

More importantly, the governor must base his or her budget proposal in February on the latest consensus projection. Similarly, the legislature must base the budget it adopts on the most research joint forecast.

But this past June, $180 million was added to the budget with no consensus projection to back it up.

Senate President Pro Tem Martin M. Looney, D-New Haven, who called the consensus projections “a good government measure” when he voted for it 10 years ago, said Monday he believes the process still was followed this year.

Looney said Democratic leaders consulted with analysts for both budget offices and were told income tax receipts would remain on the rise. “There was newer and potentially better information,” he said.

Rep. Jason Rojas, D-East Hartford, co-chairman of the Finance, Revenue and Bonding Committee, said “what was in the consensus report was somewhat conservative. But we were still doing it based on data we were seeing from OFA and from OPM.”

Democrats noted that the projected surplus for the current fiscal year, which ends on June 30, was upgraded by $129 million last week. While this is true, none of that was attributed to growth in income tax receipts.

And Deputy House Minority Leader Vincent J. Candelora, R-North Branford, said if Democrats received assurances from fiscal analysts that tax revenues would rise, those assurances happened behind closed doors in private negotiations.

The nonpartisan Office of Fiscal Analysis does not issue public statements beyond its written reports.

“There was no basis in good government the way the Democrats did this,” Candelora said. “There’s no basis in good budgeting to be ignoring the consensus revenue process. It’s ‘good government’ when there’s a Republican in the governor’s office, but not now. This is one-party rule.”