Appropriations Budget Falls Far Short of Closing Deficit
CT News Junkie, April 7, 2016
by Christine Stuart
The legislature’s Democrat-controlled Appropriations Committee approved a budget Wednesday that falls hundreds of millions of dollars short of filling the more than $900 million deficit estimate.
Sen. Beth Bye, D-West Hartford, and Rep. Toni Walker, D-New Haven, who chair the budget-writing committee defended their decision to cut about $570 million from the 2017 budget saying they acted responsibly to close the same gap Democratic Gov. Dannel P. Malloy closed when he unveiled his budget on Feb. 3.
Bye and Walker said the spending cuts were difficult and will impact every person who receives some sort of state assistance. “There are no sacred cows in this budget,” Bye said. But Malloy and Republican legislative leaders were immediately critical of the decision not to cut the entire $911 million deficit that’s been projected by the nonpartisan Office of Fiscal Analysis.
Devon Puglia, a spokesman for Malloy, said the governor would be putting out a new budget next week that tackles the entire scope of the $911 million deficit projected by nonpartisan budget staff. “This budget only addresses part of the challenge before us – it is incomplete,” Puglia said. Republican legislative leaders were equally critical of the decision not to cut the $911 million deficit. “They failed to do their job,”
Senate Minority Leader Len Fasano, R-North Haven, said. Bye and Walker defended their decision to cut $570 million in spending. “This is the first step in the process,” Bye said. She said there is the Finance, Revenue, and Bonding Committee package expected out Thursday and there’s negotiations between Malloy and labor regarding wages and working conditions. Bye said there are some signs that revenue projections could be better after the April 18 tax deadline.
Bye said they are waiting to see what the Finance, Revenue, and Bonding package looks like. However, that committee avoided raising any bills that increased new revenue this year. It did consider a few bills that would reduce revenues to the state. “These were very conservative projections and we’re hoping that things will turn around,” Bye said of the revenue figures. Bye said she’s “frustrated” that Malloy would propose coming out with another budget before the Appropriations Committee votes on its budget. That being said, “we’re going to work with the governor and with Republicans to get to the bottomline we have to get to,” Bye said.
The committee voted 33-24 in favor of the budget, which makes deep cuts to local education funding and higher education funding. Fasano said he doesn’t know what world Bye and Walker are living in, if they think revenues will increase after the April 18 tax filing deadline. F
Falling revenues, especially income tax back to top
Falling revenues, especially personal income tax, have driven Connecticut’s $19.9 billion 2017 budget further into deficit.
Fasano said revenues have not gone up in the month of April over the past several years. “These guys are living in a world that doesn’t exist,” Fasano said. “And that’s why we have budget deficit, after budget deficit, after budget deficit.”
Fasano said they are doing the state a disservice if they think the revenue figures will come in better than projected. He said it’s best to plan for the worst and hope for the best. Connecticut has about $406 million in its Rainy Day Fund, which isn’t enough to cover the full amount of the deficit.
State Comptroller Kevin Lembo warned in his April 1 letter to Malloy that he continues to be concerned about erosion of revenue as they approach the end of the fiscal year. He said the withholding portion of the income tax showed solid growth in the month of March and is still underperforming on a year-to-date basis.
However, there has been some slippage in the sales tax trend and national economic growth projections have moderated. Lembo pointed out that April’s income tax receipts “are highly dependent on capital gains and bonus payments to workers. ”This category of revenue has been exceptionally volatile over the past several decades and is difficult to project given the absence of timely Connecticut specific data on the major factors driving collections in this area.”
Human Services Advocates who run substance abuse treatment facilities, provide mental health services, or care for the developmentally disabled, said the Appropriations Committee budget restored some of the funding the governor’s budget cut.
Heather Gates, president and CEO of Community Health Resources, who said Malloy’s budget would have forced her organization to end services it provided to some of the neediest Connecticut residents, applauded steps the Appropriations Committee took to restore some of those line items. Gates said the budget restored about $15 million in grant funds for mental health and addiction services that were cut by the governor. “It’s not a budget without cuts, but it’s better than what the governor proposed,” Gates said. She said it leaves services in much better shape, even though like the governor’s budget, it delays starting new initiatives.
Jeffrey Walters, interim CEO of the Connecticut Community Nonprofit Alliance, said they are concerned that the relief they are feeling today will be gone tomorrow. However, he said they will continue to be vigilant in protecting the most vulnerable people in the community.
In a surprising move the Appropriations Committee cut the legislature’s Commission on Aging, which is an independent agency with four employees and a budget of about $500,000. Sen. Mae Flexer, D-Killingly, said with an aging population in the state “it’s a mistake not to fund that commission.” Municipalities
The Appropriations Committee budget cuts the Education Cost Sharing funds for local elementary and secondary education by about $68 million. “Unfortunately, with town budgets already stretched thin, cuts in municipal aid will impose a tremendous burden on our property taxpayers,” Betsy Gara, executive director of the Council of Small Towns, said. She said municipalities will have no choice but to raise property taxes in order to make up for these reductions.
Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities, said the Education Cost Sharing formula is already underfunded to the tune of $600 million and this will only add to the burden towns already face.
The Appropriations Committee budget moves about $30 million in school transportation grants and about $7.7 million from the Department of Emergency Services and Public Protection out of the general fund over to the special transportation fund. Walker said the purpose of moving those accounts over to the Special Transportation Fund was to make sure every agency felt an equal amount of pain. It means the Special Transportation Fund, which will be used to help fund Malloy’s transportation vision, won’t have as much money in it for that purpose. However, Walker was quick to point out that the amount of money the state is borrowing for transportation is still about $600 million.
“We’re not cutting, we’re just making things a little more equal right now,” Walker said. Sen. Dante Bartolomeo, D-Meriden, said she would like to see the General Assembly reclaim the 1 percent of the sales tax it’s diverting to transportation and a municipal account to lower property taxes. “I don’t think this is the time to lose money from the general fund,” Bartolomeo said. However, sweeping those accounts will be a decision left to the Finance, Revenue, and Bonding Committee, which is expected to release its revenue package Thursday.