Few people outside of state government fiscal circles know what a “deficiency bill” is. That’s about to change.
Leaders of the legislature’s budget-writing panel said they would use the technical measure — normally used to address routine agency overspending — to pump big state dollars into core programs like education, social services and health care.
And by working through the deficiency bill, the legislature can provide relief soon, rather than wait for the next two-year budget cycle to begin July 1.
“We’re looking at responsibilities that occur over and over again, every year, that we always seem to kick down the road,” said Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee.
Sen. Cathy Osten, D-Sprague, the panel’s other co-chair, agreed the focus will be on issues “that have been long-standing in the state,” problems that only have been exacerbated over the past year by the coronavirus.
Walker and Osten have joined dozens of progressive Democrats in the legislature in pressing Gov. Ned Lamont and other leaders to tap the state’s record-setting budget reserves to complement the billions of federal relief dollars that have poured into Connecticut since the pandemic began.
The state’s fiscal cushion has only swelled since shortly after COVID-19 broke out in Connecticut. The reserve is already full, holding slightly more than $3 billion, or 15% of annual operating expenses.
And pandemic-related closures and program changes have helped other agencies save much more than the cost overruns of a few. Overall General Fund spending is projected to be $445 million below budgeted levels this fiscal year, and the surplus forecast is for $245 million. Coupled with another savings program, which blocks the state from spending a portion of income tax receipts tied to capital gains, and Connecticut should end the fiscal year with about $800 million left over.
The deficiency bill is the key to tapping any surplus dollars.
Even when the budget is on pace for a surplus, state agencies must report areas of overspending to the legislature. These are referred to as “deficiencies,” meaning the budget didn’t include enough funds to cover their needs. In the context of a state budget that spends $22 billion per year, deficiencies totaling $100 million or more are common.
The Lamont administration has asked legislators to approve deficiencies, or overspending, by a handful of agencies totaling $70 million. The Executive Branch also wants lawmakers to reduce appropriations for the Department of Social Services by a matching amount, since that agency is running considerably in the black.
Walker and Osten envision a deficiency bill that could appropriate as much as this year’s projected surplus, about $245 million. This would cover the cost overruns and provide more to those in greatest need.
Lamont and other fiscal conservatives have warned that the state spending cap will limit how much added spending lawmakers can authorize in the next two-year budget.
Pumping those extra dollars via the deficiency bill into key programs could push finances for the current fiscal year over the spending cap, which legislators can’t do without a 60% vote of approval in both the House and Senate. But if that’s successful, it would alter spending cap calculations going forward, potentially allowing more dollars to be appropriated in the coming biennial cycle without violating the limit.
And both Walker and Osten said they don’t want these additional state investments in core programs to be a one-time occurrence but spending that will continue or even potentially grow going forward.
The leaders say there are no secrets about where the greatest need lies. While they didn’t discuss specific relief levels Tuesday, the co-chairwomen noted that higher education has been hard hit by the pandemic.
The regional state university and community college system was facing a $90 million hole earlier this fiscal year, while the University of Connecticut’s deficit topped $100 million.
Federal relief covered about 80% of those gaps, but higher education systems had to close the rest with pay cuts, layoffs, job freezes and other cost-cutting measures.
And both systems project significant built-in deficits for the next two-year budget cycle.
Private nonprofit agencies, which deliver the bulk of state-sponsored social services, have lost millions of dollars since the pandemic began, due to lost revenues as well as added cleaning, technology and hazardous-pay costs.
And the industry has complained for years that largely stagnant state funding has pushed many nonprofits to the brink.
The $1.4 billion the state pays the industry now is only about 10% more than it did two decades ago. After adjusting for inflation, the CT Community Nonprofit Alliance estimates social service agencies, collectively are down $461 million per year.
The legislative leaders said they plan to brief Lamont’s budget director, Office of Policy and Management Secretary Melissa McCaw, later this week on their plans for the deficiency bill, and the committee is expected to adopt the measure later this month.
McCaw’s office did not comment on the committee leaders’ statements Tuesday.
Lamont has been reluctant to spend the state’s reserves since the pandemic began, noting that the fiscal situation is volatile, and analysts still are projecting a significant deficit for the upcoming biennium.