Sen. Cathy Osten, D-Sprague (left) and Rep. Toni Walker, D-New Haven, co-chairwomen of the Appropriations Committee
Sen. Cathy Osten of Sprague and Rep. Toni Walker of New Haven, Democratic leaders of the Appropriations Committee. Keith M. Phaneuf / CTMirror.org

The legislature’s Appropriations Committee is expected to propose a two-year state spending plan Wednesday that makes new investments in municipal aid, higher education and social services.

The Democrat-controlled panel also is expected to push back against Gov. Ned Lamont’s reluctance to reach deeper into the state’s pockets and instead propose that the state carry forward millions of dollars unspent from the current fiscal year to help those most harmed by the coronavirus pandemic.

Full details of the plan were not available late Tuesday, but Sen. Cathy Osten, D-Sprague, co-chairwoman of the committee, said the package also bolsters aid modestly for nursing homes and reverses a cut Lamont proposed for state aid to local school districts.

“We did a lot of things necessary to make sure people were protected — across the spectrum,” she said.

And while the coronavirus pandemic has exacerbated some problems, many areas the panel is targeting involve long-standing challenges that too often were ignored or given short shrift, she added.

Lamont proposed a $46 billion, two-year budget on Feb. 10 that relies heavily on federal aid and state reserves to close a major deficit without tax hikes and bolsters funds for cities and towns. But many progressive Democrats argued it did too little to help those most injured by the pandemic.

Social services, higher education, local aid are among top priorities

Osten and her co-chair, Rep. Toni E. Walker, D-New Haven, told the CT Mirror last week that the committee’s proposal would include a plan to gradually close the funding gap involving nonprofit social service agencies — though correcting that problem would take longer than a 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.

Osten and Walker both have said higher education will be another priority in their plan.

The 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.

Cities and towns also reported hundreds of millions of dollars in tax revenues lost or deferred during the pandemic, and Osten said the budget recognizes local government struggles to control property taxes.

The package reverses Lamont’s proposal to suspend about $90 million in Education Cost Sharing grant increases to local school districts over the biennium.

It also dedicates a portion of sales tax receipts to keep the legislature’s pledge to increase non-education aid.

Lawmakers passed, and Lamont signed, a bill earlier this year to increase PILOT [Payment In Lieu Of Taxes] grants to cities and towns by roughly $135 million per year. 

The measure didn’t actually appropriate the funds, but officials called it a “marker” and a “pledge” that would be fulfilled this spring when the next state budget is adopted.

PILOT grants reimburse communities for a portion of the revenues they lose because property owned by the state and by nonprofit colleges and hospitals is exempt from local taxation.

Expanding access to health care

Besides pressing for more municipal aid, many progressive Democrats in the House and Senate also pushed for greater investments in health care.

Though details were limited, Osten said the new budget will expand income eligibility rules for Medicaid.

The package also is expected to include a modest inflationary increase in rates for nursing homes. Current law calls for nursing homes to receive an inflationary increase each year, but legislatures and governors routinely suspend this requirement.

The Lamont administration notified nursing homes earlier this month that another major round of federal pandemic relief for Connecticut would be used to provide a 5% rate increase for the months of April through June, which means an extra $14.1 million for the industry. The state also will delay implementation of a new rate system for nursing homes, which could reduce funding for some facilities, from July 1 to October 1.

But the Connecticut Association of Health Care Facilities, which represents about 140 nursing homes, recently warned state officials this is not sufficient to counter the losses these businesses absorbed during the past year.

And SEIU District 1199 New England, the state’s largest healthcare workers’ union representing about 5,000 nursing home caregivers in the state, warned of a potential strike involving 51 facilities where its members are working under contracts that expired March 15.

Another healthcare-related investment in the budget to be approved Wednesday involves a new state office, within the legislative branch, which will examine ways to mitigate racial inequity in access to care, Osten said.

GOP: Growing spending with one-time money is dangerous

But to pay for these programs and expansions, and to get them to fit under the statutory spending cap, legislators may have to get creative.

Lamont’s budget office warned back in February that state finances, unless adjusted, were on pace to run $2.6 billion in the red over the next two fiscal years combined.

Connecticut received $2.6 billion in direct aid to state government through the latest round of federal pandemic relief. It holds a record-setting $3 billion in its rainy day fund, and analysts say the current fiscal year is set to close on June 30 with about $800 million left over.

Part of that surplus stems from hundreds of millions of dollars that the Lamont administration has saved since the pandemic began — because of enhanced federal aid covering certain state costs, as well as the coronavirus limiting certain programs and agency operations.

Osten and Walker said last week that their committee wants to use an accounting maneuver routinely employed by governors and legislatures — a carry-forward — to use some of this fiscal year’s unspent funds in the coming biennium.

Because those funds were appropriated this fiscal year, they could be spent in 2021-22 without pushing expenditures for that year over the cap.

The new budget also is expected to employ revenue “intercepts” —  an accounting tool that targets dollars before they arrive in the budget and assigns them for specific purposes. Because the cap only applies to budgetary appropriations, these dollars then can be used without violating the cap.

The ranking Republicans on the Appropriations Committee, Sen. Craig Miner of Litchfield and Michael France of Ledyard, both warned Tuesday about Democrats’ committing the state to too much spending in tough fiscal times.

Miner said he believes much of Connecticut’s economy is healthy, despite the pandemic, but noted that the tourism, restaurant and hospitality sector remains fragile.

“The problem is we’ve got a [Democratic] majority that is — true to form — most likely going to develop programs, create agencies, do all kinds of things at a time we should not be doing business as usual.”

And should the stock market crash, or should the economy struggle even after federal aid expires after this biennial budget cycle, France added, new state programs will have to be cut as quickly as they were created — a dynamic that has happened often in Connecticut.

“You end up waking off a cliff in two years,” he said, “and we see that budget after budget, historically.”

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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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