Many core services are eroding as money goes to pensions

Rick Browne, like many retirees, hopes to stay in his Waterbury house as long as possible — but it’s getting harder.

The 68-year-old widower has been relying on federal heating assistance for the past five years but still juggles natural gas bills against costly medications he needs for a degenerative disc in his neck and other ailments.

Because of federal cutbacks, Browne and thousands of other recipients of the Connecticut Energy Assistance Program stand to not receive hundreds of dollars this winter that they received in previous years — unless the state government spends a tiny fraction of its projected surplus. 

Gov. Ned Lamont and the legislature have been flirting with adding state dollars to this federally funded program for two years now. But they still haven’t pulled the trigger, questioning whether it’s the state’s responsibility — and whether it can be done in compliance within budget controls that have dominated government finances since 2017.

Officials trumpet how those “fiscal guardrails” — mandatory savings systems and spending and borrowing caps — have eliminated deficits and reduced debt. But even as the government has piled up cash, many social service, health care and education programs either have slipped or remained in the same dire straits they faced before the boom times. 

Governors and legislators have long had a particularly dysfunctional relationship with one guardrail, the spending cap — questioning its workability and crafting numerous gimmicks to circumvent that limit.

Lamont, a wealthy businessman from Greenwich, insists Connecticut has found the right balance, investing in core programs and fixing decades of fiscal irresponsibility.

But Browne and many others question whether state officials understand how many are struggling.

“The scary part is the people making the decisions,” he said. “They don’t know how hard it is to make it month-to-month.”

“Gov. Lamont continues to tout his fiscal guardrails as what’s best for all residents,” said Norma Martinez HoSang, organizing director of Connecticut For All, a statewide coalition of more than 80 faith, labor and civic organizations. “But how is it morally or fiscally responsible to pull more funding away from critical programs that take care of our neediest residents?”

A former private-sector social worker, Browne doesn’t get the generous pension and retiree health care benefits his state-employed counterparts enjoy. Except for heating aid, he’s avoided other types of public assistance, including food stamps and Medicaid. But he worries that his dream of retiring in his own home will soon be over.

“Eventually, you’re going to have to make a decision to sell and move somewhere else — not in the state of Connecticut,” he said. “If the prices keep going up, I won’t be able to stay here.”

CT could keep poor families warm with a sliver of the surplus

The winter heating debate often centers on a simple question: If the state could keep many families warmer this winter by sacrificing a sliver of its budget surplus, why doesn’t it?

According to the January update from Lamont’s budget office, the General Fund is operating $167 million, or slightly less than 1%, in the black. There are problems — about $285 million in cost overruns in various agencies — but the budget began with a $400 million built-in cushion, and revenues have been strong.

And then there’s the volatility adjustment, a savings program that doesn’t allow the legislature to consider spending a portion of quarterly income and business tax receipts. That is projected to capture another $478.5 million.

Coupled with the operating surplus, that’s almost $645 million that could be left over once the fiscal year ends next June 30.

Backing that up is a $3.3 billion rainy day fund, equal to 15% of the General Fund, the largest reserve in state history.

Set against that is a request from nonprofit Community Action Agencies, the AARP and other winter heating assistance advocates.

The federal Low Income Home Energy Assistance Program (LIHEAP) grants that fund nearly all the aid provided through the Connecticut Energy Assistance Program are down significantly this winter.

Congress rolled funding back to pre-pandemic levels, but the Lamont administration projects demand is more than 40% greater now than it was then.  

The maximum benefit for the poorest families is projected to drop almost $1,000 this winter, from $2,320 to $1,350, while many other households are expected not to receive hundreds of dollars this winter that they might have received in previous years.

Energy assistance advocates asked Lamont and lawmakers in August — before the winter heating season began — to bolster federal funding by 20%, which would add roughly $17 million to the program, to mitigate the financial hit to an estimated 116,000 needy households.

That’s less than 3% of this year’s surplus. Add the rainy day fund into that comparison and it’s about 1/23^rd of 1%.

The response largely has been to wait and see, though legislative leaders say they hope to add some modest state funding to energy assistance in mid-February.

Last year, when advocates asked state officials to mitigate a smaller LIHEAP shortfall, Lamont and lawmakers did dedicate $30 million — on the condition that it not be touched unless all federal money had been exhausted.

Advocates were frustrated last June when they learned the state never spent its $30 million. Critics charged the state set maximum benefit levels too low, ensuring state money would not be tapped, even though requests for help were up more than 20% last winter compared with the 2021-22 season.

The Lamont administration has argued winter heating assistance primarily is a federal responsibility. And even some legislators who favor using state funds to bolster the program note that doing so would create another problem.

Connecticut has a spending cap, and many programs are fighting for scarce dollars beneath that limit. Budgeting for heating assistance could eat up cap space that another program needs.

The competition for state funding is fierce and has been for quite a while. And while the spending cap is far older than the other guardrails, like all budget controls, it has been plagued by complications.

CT has struggled with its spending cap for decades

Created in 1991, the cap was built to keep most appropriations in line with personal income or inflation. Payments on bonded debt and aid to poor cities would be exempted, and there would be a safety valve. New exemptions could be added, and cap levels could be legally exceeded, if the governor declared a budget emergency and three-fifths of the House and Senate agreed.

But it wasn’t the product of exhaustive study, according to Senate President Pro Tem Martin M. Looney, D-New Haven — a House member then and one of only a few current lawmakers who served at that time. Lawmakers focused most of their attention in 1991 battling over and eventually adopting a new state income tax that would resolve a historic deficit. The cap was crafted out of political necessity to temper outrage over the income tax, which still prompted thousands of residents to protest on the Capitol lawns.

And it didn’t take long for spending cap problems to arise. 

Even though four out of five voters directed the legislature in 1992 to write a spending cap into the state Constitution, lawmakers couldn’t agree on whether to use the preliminary statutory cap from one year earlier or to develop something new.

This prompted a 1993 opinion from then-Attorney General Richard Blumenthal that, by default, legislators effectively had elevated their original statutory cap system to constitutional amendment status.

In the 1990s and early 2000s, Republican Gov. John G. Rowland and a Democratic-controlled legislature legally exceeded the cap five times, spending much of the money during flush times on smaller projects in legislators’ home districts.

In 2005 and in 2007, Republican Gov. M. Jodi Rell and Democrat-controlled legislatures employed the cap’s safety valve, adopting biennial budgets that exceeded cap limits.

The first exception was done to help secure major new federal aid for nursing homes and community-based social services. The second shattered the cap by a record-setting $690 million. This was done to dramatically boost local education aid and to expand health care access for the poor.

In the 2010s, when cap growth was minimal but lawmakers were wary of exceeding the cap openly, Gov. Dannel P. Malloy often had to be creative.

Funds owed to charter schools were instead forwarded to their host cities, who then were ordered to give the money to the schools. Aid to poor cities was cap-exempt at the time, while aid to charters was not.

Connecticut borrowed more than $80 million some years to cover town grants, taking advantage of the exemption for debt service.

Required contributions to pensions often gobbled up most allowable spending cap growth. Malloy and legislators responded by reinterpreting the debt service exemption to include payments on pension obligations.

Spending cap tightened in 2017 but squeeze wasn’t felt until now

By the time a slim Democratic majority needed Republican votes to end a nine-month-long budget debate in 2017, the GOP demanded a more stringent cap, despite all of the challenges with the first one.

There would be no more exemption for aid to poor communities. Pension contributions would be phased back under the cap as well. And other guardrails would be added to tighten borrowing and encourage the government to build reserves and pay down debt.

Already almost four months into the 2017-18 fiscal year with no budget in place, majority Democrats took the deal, and a bipartisan plan was signed into law on Halloween.

Almost immediately after, the stock market began a multi-year surge, and tax receipts began pouring in at unprecedented levels.

The new spending cap also created challenges, but before legislators could fully assess the impact, two more things happened that delayed a return to the cap problems of prior decades:

The coronavirus struck, and with it came roughly $2.8 billion in American Rescue and Recovery Act funds from Congress that Connecticut could spend outside of the cap.

And inflation showed its silver lining. 

I can’t quite figure out what has changed in the last nine months that wants everybody to change their mind.

Gov. Ned Lamont on the renewal of fiscal guardrails

Annual spending growth under the cap is tied to household income or inflation, whichever increases the most. And over the past decade, whichever metric was used, spending growth under the cap ranged from 1.8% to 3.3% — until two years ago, when inflation hit a 40-year-high.

Allowable spending growth was 5.5% last fiscal year and 5.7% this year.

But the relief is fading away.

Connecticut has nearly exhausted its ARPA dollars, inflation is coming down, and growth for most segments of the budget is expected to be limited to 4%.

Legislators and special interests “have to temper their expectations accordingly,” Lamont’s budget director, Jeffrey Beckham said, urging them to remember spending has been able to grow, and the spending cap was designed to reflect what taxpayers can afford.

Beckham also noted that legislators voted unanimously last February to renew not only the spending cap but the entire set of fiscal guardrails for another five years.

Why would lawmakers enact them twice in six years if the system doesn’t work?

“We 100% endorsed this — less than a year ago,” Lamont said. “So I can’t quite figure out what has changed in the last nine months that wants everybody to change their mind.”

But others say it’s not that simple. Sometimes the conditions that created legislation changed abruptly. 

For example, Lamont blocked an initiative in 2021 to invest $600 million in Connecticut’s poorest children — after he’d already signed a bill to launch the program — because he didn’t like the financing method. Following an outcry from legislators of color and other advocates for the Baby Bonds program, he accepted a compromise proposal from state Treasurer Erick Russell two years later and launched the program with a different funding mechanism.

In the case of the guardrails, officials say the government is still learning how these controls are influencing programs.

Just as the income tax’s adoption in 1991 prompted an angry public backlash, so did the major state tax hikes ordered in 2009, 2011 and 2015.

Berlin Democrat Joe Aresimowicz, who was House speaker in 2017, said “there was enormous pressure on our budget-makers” then, not only because a new spending plan was months overdue but because legislators were “bearing in mind the [fiscal] sins of our predecessors.”

Connecticut has put itself in a much better position, and Lamont and legislative leaders “really need to sit down and have those long-term discussions” about which guardrails work and which don’t, Aresimowicz added.

Looney and the current House speaker, Hartford Democrat Matt Ritter, have taken criticism for renewing the guardrails early in the 2023 session, scheduling a vote three months before the current state budget had been crafted.

There were no public hearings, detailed studies of the system or even much legislative debate.

Ritter said no one had or has proposed wholesale repeal or a major overhaul of the guardrails. The goal behind an early vote was to get that issue out of the way, to leave more time later to tackle specific budget issues.

But Ritter added he believes most legislators assumed modest adjustments to the guardrails still could be made.

The system lawmakers adopted allows modifications to any guardrail, if the governor and three-fifths of the legislature agree, like the safety valve built into the original spending cap.

The speaker also acknowledged that while the pension funds and budget reserve have been the main beneficiaries — by far — of the billions of surplus dollars run up since 2017, legislators increasingly worry that programs aren’t getting sufficient resources. And with federal pandemic aid nearly exhausted, those fears are intensifying.

“It was never meant to be a situation where we only paid our pension fund and nothing else,” Ritter said. “This is not meant to be a straitjacket that just punishes” programs.

Medicaid system had problems well before COVID

The co-chairwomen of the legislature’s Appropriations Committee, Rep. Toni E. Walker, D-New Haven, and Sen. Cathy Osten, D-Sprague, say many programs had funding problems even before state finances began to boom after 2017. 

But many mistakenly assume, they say, that all programs improved or at least held their ground during this period. 

They did not.

Lamont noted that Connecticut has one of the highest insured populations in the country, an achievement driven largely by HUSKY, the state’s Medicaid program for poor families.

But Walker and others say that means little if these insured households can’t find a doctor willing to treat them because Medicaid reimbursement is too low. And the federally qualified health centers that remain a key source of health care access in poor communities, particularly for persons of color, have their own financial challenges.

A 2019 analysis by KFF, the health care think-tank formerly known as Kaiser Family Foundation, found that Connecticut’s Medicaid rates for primary care doctors’ services ranked 22^nd among all states. 

Connecticut ranked 30^th for rates paid to obstetricians and 42^nd for those covering other services.

I think the problem is much more widespread than what we actually even acknowledge.

Rep. Toni E. Walker, D-New Haven, on Medicaid rates

According to a memo prepared last March for Connecticut legislators by the Department of Social Services, the state last ordered a broad-based increase in Medicaid rates for primary care doctors in 2014. An August 2018 reduction was upgraded slightly three months later but not fully restored to 2014 levels.

Though rates for certain specialists have been upgraded in recent years, the last broad-based increase for specialists took effect in 2008.

For example, the Connecticut Mirror reviewed a state Medicaid fee schedule for psychologist services. Of the 29 rates, 27 took effect in January 2008, while two smoking prevention service rates were adjusted in December 2010.

The Department of Social Services is crafting a plan to help bolster Medicaid rates.

But the key, Walker said, will be finding a way to pay for rate increases.

“I think the problem is much more widespread than what we actually even acknowledge,” she said, questioning whether state officials even want to learn how many poor residents are effectively uninsured, unable to find a doctor willing to treat more patients on Medicaid.

I think everyone agrees Medicaid rates need to be increased for all providers.

Shawn K. Frick, CEO of the Community Health Center Association of Connecticut

The health center’s Medicaid rates have been tied for many years now to a national index that reflects medical inflation, but “these increases are not nearly enough to keep pace with cost drivers like health technology upgrades, staff salaries, expansion of services and inflation,” said Shawn K. Frick, CEO of the Community Health Center Association of Connecticut.

The governor and legislature carried $32 million from last fiscal year’s surplus into 2024-25 to assist the centers, but that is one-time money, and Lamont already is urging all groups who received a share of surplus dollars not to expect that again and again.

And it’s been two decades since the foundation for the FQHC rate system was increased in Connecticut.

“I think everyone agrees Medicaid rates need to be increased for all providers,” Frick said, adding that “chronic underpayments to FQHCs have created access issues for poor and marginalized communities throughout the state. We have almost a million people enrolled in Medicaid, but by underpaying providers, Connecticut has limited health care access for up to a third of our residents.”

Nursing homes face stagnant funding

Medicaid covers roughly 70% of the cost of nursing home care in Connecticut, and elder care also is facing a similar, long slow deterioration of funding.

For nursing homes, it often has been two steps forward and two steps — or more — back.

Since 2018, nursing homes have received nearly $150 million in ongoing assistance, though much of that must be used to boost the pay of their workers, according to state budget records. Over the same period, lawmakers canceled more than $220 million otherwise required by law to cover health care inflation. The overwhelming bulk of those funds were earmarked for nursing homes.

And the preliminary budget for next fiscal year gives homes $33 million for wages — and cancels $67 million in inflationary adjustments.

Even given a one-time Medicaid rate hike worth $86 million the industry received in 2022 to offset a portion of the extra costs it faced during the initial waves of COVID, the industry is worse off than it was before funds began pouring into state government’s coffers seven years ago, said the head of the state’s largest nursing home association.

“That Connecticut’s skilled nursing facilities are, year-after-year and specifically during the period of the imposition of the fiscal guardrails, … losing ground against inflation and extraordinary staffing and other costs increases is actually well-documented,” said, Matthew Barrett, president and CEO of the Connecticut Association of Health Care Facilities. “A Medicaid funding system that is supposed to be cost-based and adjust for [severity of patients’ illnesses] has been too often undermined with inflation caps or outright freezes.”

Social service providers worry they aren’t valued at the Capitol

Barrett’s objections echo those of the hundreds of private, nonprofit community agencies that deliver the bulk of state-sponsored social services to people struggling with physical and intellectual disabilities, mental illness and substance abuse issues.

The CT Community Nonprofit Alliance reported in January 2021 that since 2007, largely stagnant state funding was causing the industry to lose $461 million annually due to inflation.

Three years later, it estimates the gap now exceeds $480 million. 

The industry’s pleas for greater funding date back to the 1990s, and the state’s counter that the budget is too lean to accommodate most of those requests is just as old.

But alliance CEO Gian-Carl Casa said the recent combination of a costly pandemic that has pushed demand to record levels and lean state spending despite historic surpluses has shattered many providers’ belief that their calling is valued.

“What is the benefit of the state’s boom years if our needs are not being met?” Casa said.

An industry survey last year found one in five nonprofits are struggling to stay in operation and more than 36% are reporting that they cannot meet demand in their region.

“We’re not a fly-by-night, come in, make a couple of bucks and leave” business, said Carrie Dyer, who has spent 30 years with Reliance Health of Norwich, the last eight as its CEO. “You feel a little disposable. You feel taken for granted.”

Reliance serves about 1,500 adults with mental health issues or substance abuse disorders — most without insurance — offering residential and other services in eight eastern Connecticut communities.

Like the nursing home industry, nonprofits say most of their state funding must be used to raise salaries.

After more than a decade of largely flat funding, Dyer received a 4% increase that had to be used for wages, and then a flexible 2.5% bump last year that she nonetheless used for the same purpose.

Like many nonprofits, Reliance struggles with annual employee turnover rates that approach 20%. Dyer said she would rather try to keep staff off food stamps and subsidized health insurance — and maintain their relationships with clients that rely on them.

If that means the façade must fall off her main office building and that other physical plant issues must wait, so be it.

But she quickly added, “I think we’re at the end of our creative stretch. We’ve done every acrobatic feat we can.”

Jennifer Brownlee of Mystic, 47, a single mother with three grown children and a client of Reliance, said many don’t realize what nonprofits do to support Connecticut’s economy. But she and so many others wouldn’t be employed were it not for the help they have received.

Brownlee has a longstanding relationship with the Norwich nonprofit and has participated in a wide array of programs: homelessness outreach services, substance abuse counseling, peer support, employment assistance — and even rides to work for six months after she found a job.

“I went from being almost suicidal to stable,” she said. “You cannot believe how happy I am, all of the services I received over the years.”

Brownlee has five years of sobriety and has been working for the past two and a half years as a direct support professional for The ARC of Eastern Connecticut. But she still goes back to Reliance occasionally, “more when I’m having a rough spot,” she said.

Osten, one of the legislature’s most vocal advocates for a long-term plan to bolster social services funding, said she and her colleagues on the Appropriations Committee are increasingly being asked to solve an unsolvable puzzle.

Too many core programs that were in rough shape before the pandemic have since been strained to a breaking point, she said. Paying down Connecticut’s legacy of pension debt is important, but it can’t be the state’s only priority.

“We do have to make sure we have a balanced approach to our expenditures,” Osten said. “We have needs that have to be covered.”

CT agencies downsized as government’s coffers swelled

Unmet needs have been a common charge leveled against many state agencies since 2017, particularly by state employee unions and during the worst years of the coronavirus pandemic.

Between November 2017 — when the first guardrails were first signed into law — and November 2022, the number of filled Executive Branch positions, excluding higher education, dropped from 26,992 to 26,497, according to the Office of Policy and Management.

Union leaders found that odd for two reasons.

First, by late 2017, the Malloy administration had nearly completed downsizing the Executive Branch by 10%.

And by late 2017, staffing already was 26% lower than where it had been one decade earlier.

Even before Lamont took office in 2019, the legislature had committed to finding ways to make staffing smaller and more efficient through technology — a challenge Lamont embraced.

But shortly after the coronavirus first struck in March 2020, many legislators joined union leaders in declaring a staffing crisis in several agencies, particularly in human services departments.

The administration did boost hiring significantly in 2023, raising Executive Branch staffing to 28,690 positions. But that still is almost 6,000 below staffing levels from 15 years ago.

“Gov. Lamont’s rigid adherence to arbitrary fiscal guardrails, paired with his failure to account for the increased social need … has direct implications for working families,” said Carl Chisem, president of Connecticut Employees Union Independent Local 511, which represents thousands of state maintenance and other trade workers. 

Chisem, who also co-chairs the state employee unions’ Racial Justice Committee, added that “the goal of any great governor is to be a leader who invests in the futures of all residents.”

Is higher education in a deepening crisis?

Walker and other legislators argue many residents’ economic futures are being jeopardized by the deterioration of Connecticut’s public colleges and universities. She worries that many policymakers don’t realize community colleges play a huge role in mitigating an enormous racial gap in educational opportunities.

Tiffany Robinson, 25, a student at Housatonic Community College in Bridgeport, originally hoped to become a professional firefighter. Robinson abandoned that plan when it became too difficult to get the necessary courses. She also dropped any dream of going onto a state college for a four-year degree.

‘I believe it’s too much money to transfer to a four-year school,” she said. “I currently don’t see a way where I would transfer to a four-year college and pay that back.”

Robinson, who is poised to graduate next May certified as a sterile processing technician, if she can afford the latest tuition hikes, has been taking courses since 2020, working part-time jobs in everything from babysitting to health care. 

But Robinson, who immigrated with her older brother to Connecticut from Jamaica 12 years ago, can’t help but notice how many “people who look like me” are struggling to hold onto their education.

“It’s a heart-wrenching situation,” she said. “It’s very difficult to see that here at community colleges, where students of color want to better themselves, want to have a better experience in their lives, and it’s pretty much getting pushed away from them.”

Carole Lopez, 44 of Hartford, a divorced mother of two, said she wouldn’t be close to graduating from Manchester Community College were it not for the food pantry there, which has provided her both with a job and food assistance.

Lopez, who has a leg disability, was a full-time package handler with Fedex but had to leave after the pandemic began to limit exposure. Her eldest son, Saul, is a Type 1 Diabetic, jeopardizing his immune system. The first time he caught COVID, he was hospitalized.

Lopez needs only the credits from an internship this spring to graduate and begin her career as a drug and alcohol abuse recovery counselor. She even hopes to eventually find employment at the Manchester recovery center where she will intern, if she can afford the roughly $900 course fee for her internship.

Lopez, who also is MCC student government president, said she increasingly is pulled away from worrying about her own finances when her fellow students seek support with their own crises. 

“I’m like, ‘I’m so sorry, I don’t know what we’re going to do,’” she said, adding that some of her classmates are living in cars, hoping to complete school before funds run out. “It’s heartbreaking. … They know that the only thing that’s going to get them to have an apartment is having a career.”

The typical community college student, particularly in urban centers, is working two jobs while taking classes, Walker said, noting that many community colleges besides Manchester’s have opened food pantries that provide free or discounted meals and groceries.

“Many of these kids come to school without having had a meal,” Walker said. “They are driven to try and get an education at any cost. … And we’re saying we can raise tuition on them?”

Full-time community college students will pay $5,218 annually starting next fall. That’s up 11% or $518 in two years, though there is a program to help students graduate debt-free. Similarly, full-time resident students at a regional state university will pay, on average, $28,375 per year starting next fall, up 7% or about $1,800 in two years.

The Connecticut Board of Regents for Higher Education, which oversees the community colleges and regional four-year state universities, has said it had no choice, given declining state aid and the challenge of paying for major salary increases Lamont negotiated with all state employee unions two years ago.

But Lamont said higher education funding is at a record high. It is, looking at the base block grants given to public colleges and universities.

But the governor and legislators also pumped hundreds of millions of dollars from surplus and pandemic grants into higher education right after the pandemic began and have begun pulling that funding back. 

Base state funding for the Board of Regents’ system is slated to grow modestly next fiscal year from $423 million to $440 million, according to the biennial budget lawmakers adopted last spring. But funding from temporary sources would drop significantly, from $224 million to $76 million.

And students, faculty and others argue that higher education had funding challenges before the pandemic that have only gotten worse.  While enrollment has dropped between 2.5% and 4% in these systems over the past two years, costs have not. Even with the tuition and fee hikes, officials project a shortfall in the state college and university system unless legislators approve more funding.

Colena Sesanker, a philosophy professor at Gateway Community College in New Haven and political director of Local 1973 of the Connecticut Congress of Community Colleges, commonly known as the 4Cs, said it’s hard to understand the tuition and fee hikes when Connecticut is saving billions of dollars annually — on grounds that all these tax receipts are too volatile to spend.

“If any one of us allowed our children to go hungry and restricted their future based on unfounded anxieties about future fluctuations in income,” she said, “we'd be deemed unfit to run a household.”