Budget Standoff Could Threaten Funding Disruptions Into The Fall
Hartford Courant, June 30, 2017
By Daniela Altimari
Municipal leaders, state agencies and nonprofit human service providers that rely on the state for funding are scrambling to determine the potential impact with the end of the fiscal year looming and members of the legislature unable to agree on a budget.
Lawmakers have been at an impasse over a new, two-year state budget and appear unlikely to adopt a temporary "mini-budget" that would cover the state's expenses until Oct. 1. That means the state's finances will be run by Gov. Dannel P. Malloy through an executive order once the new fiscal year starts on Saturday.
"In the absence of an enacted budget, the governor has an obligation to maintain essential services and satisfy obligations that are critical to the functioning of the state," Ben Barnes, the governor's chief budget adviser wrote in a memo to state agency heads and fiscal officers on Wednesday. "He may do so by allocating funds under executive authority. At the Governor's direction, the Office of Policy and Management evaluated the various demands for state services and resources, the existing legal requirements of state agencies, and available resources. With these considerations in mind, a plan for allocating funding to agencies in order for them to carry out critical state functions was developed."
The plan outlined by Barnes is guided by certain principles: spending cannot increase the state's projected deficit, collective bargaining agreements should be honored and programs that are essential to the health and safety of Connecticut's most vulnerable citizens will be considered first. Barnes also said the fiscal capacity of outside organizations — including cities and towns — should be considered when doling out reductions in spending.
Most municipalities won't feel the pain immediately. But local officials are bracing for the impact if the budget standoff stretches deep into the summer.
The lack of certainty around a state budget has deepened concerns in Hartford, where city leaders are counting on tens of millions of dollars more in aid to help offset a $65 million deficit next year. City projections show Hartford will run into cash flow problems as soon as this fall, and Mayor Luke Bronin has confirmed he is interviewing law firms specializing in municipal bankruptcy.
Bronin has said a new partnership with the state is crucial and has pressed for a long-term fix, which could include a sales tax increase or tax levied on Connecticut's nonprofit hospitals. Lawmakers so far have been unable to reach agreements on either proposal. Hartford resorted to short-term borrowing recently to cover payroll and other expenses due to an end-of-year shortfall.
Windsor Town Manager Peter Souza said Wednesday the lack of a state budget on July 1 won't trigger any drastic changes locally because the large grants the town receives, such as educational cost sharing, don't usually start coming in until October.
Souza said the town has deferred capital projects until there is a clear picture and has implemented a partial freeze on full-time hires, but added that he doesn't expect a revenue crunch immediately because residents will be paying their tax bills, which were sent out on time.
Bristol will stick to its own spending plan, but Mayor Ken Cockayne warns that financial risks will snowball the longer the General Assembly delays a decision.
"By charter, we had to adopt a budget. We did and that's what we're going to follow," Cockayne said. "We talked with our state representatives and made the best guesstimate of where we'll be when the state budget is done — and we're hoping we'll be close."
Cockayne shares the position of most municipal leaders in Connecticut: If cuts are coming, it's better that they hit at the start of the fiscal year. Communities operate on a July 1 to June 30 budget cycle; if they have to take a revenue hit in early July, they can spread the impact over 12 months. But by early October, for example, they've already burned through a quarter of their budget. That means any service cuts, layoffs, supplemental taxes or other emergency measures must be even more severe because they have just nine months to make up the savings.
Summer jobs And hospitals back to top
Municipalities aren't the only ones bracing for pain due to fiscal gridlock at the Capitol. Nonprofits that contract with the state to provide human services to people with mental health and developmental disabilities and other vulnerable groups are preparing for a 5 percent to 10 percent cut in their grants under the executive order.
"In the absence of a biennial budget, the needs of thousands of people across the state are being overlooked," said Eileen Healy, executive director of Independence Northwest, a Naugatuck-based disability advocacy and resource center. "We urge the legislature and the governor to reach agreement on a fair and reasonable budget that factors in the long-term impact of both budget cuts and spending."
Hospitals are bracing for the elimination of supplemental payments, including payments under the small hospital pool. "This would mean hospitals would experience more cuts to funds needed to care for the poor and sick," said Jennifer Jackson, CEO of the Connecticut Hospital Association. "It will result in less access to care for patients, job loss, and it will raise the cost of care. We need Medicaid funding preserved for the people of Connecticut — it is truly a lifeline."
The lack of state funding for the summer youth employment program — a reality if no budget is adopted by Friday — will cost about 400 teens in the Hartford region their summer jobs, officials at Capital Workforce Partners said.
More than 400 others would still be able to work, thanks to aid from Hartford and nonprofits like the Hartford Foundation for Public Giving. But the state-funded positions would be stripped from the program.
The youth, who are employed in public- and private-sector positions, including at libraries and municipal offices, are supposed to begin their jobs in mid-July.
"We are on the wait-and-see side of things," said Wendy Gamba, Capital Workforce's chief financial officer. "We're just waiting for the call. It's going to be very hard to start up a program at this late date, but we're going to wait and see."