Deficit Hits $365M
(Updated 3:54 p.m.) The numbers haven’t been certified by the comptroller, but Gov. Dannel P. Malloy’s budget director told the legislature’s Appropriations Committee on Wednesday that the state is running a $365-million deficit.
That means the administration will have to present a deficit mitigation plan to the General Assembly before the end of the year, if the comptroller certifies the deficit on Dec. 1.
In his presentation to the Appropriations Committee on Wednesday, Ben Barnes, told lawmakers that he’s already working on a plan and will submit one before the end of the year.
“Please know that my office has already begun work on this plan, and while I’m not prepared today to address any elements that might or might not be included in that plan, you can expect that we will announce specifics as soon as possible,” Barnes said.
Under state law, the governor must submit a deficit mitigation plan to the General Assembly when a budget deficit reaches 1 percent of general fund spending in the $20 billion 2013 budget.
The largest amount of the deficit is attributed to the Medicaid program for low-income adults.
Barnes said the Medicaid deficit accounts for about $260 million of the shortfall, largely attributable to an increased utilization of medical services and increasing caseloads.
“The enacted budget did not assume the current caseload of 83,827 would be reached until August 2013,” Barnes said.
The state is seeking a waiver from the federal government that would kick about 13,000 individuals off the Medicaid program, but no decision has been made yet.
Earlier Wednesday afternoon at an unrelated event, Malloy was asked by reporters what he plans to cut in order to balance the budget.
Malloy said those decisions have yet to be made.
To complicate matters slightly, Malloy also is in the process of developing a two-year budget that he will present to the new legislature in February.
“What would really be nice is if they would settle some of these issues in Washington so that the budget I present in February actually builds in whatever changes” are made, Malloy said.
Malloy and Barnes both expressed hope that the state may benefit from a one-time revenue spike generated by people selling off capital gains this year in an effort to avoid new federal taxes next year. Although that may help in the short term, neither are banking on it because it won’t keep the budget balanced in the out years.
Following his testimony, Barnes said he wasn’t sure when the deficit mitigation plan would be completed. He said his office still had to send their estimate of the deficit over to the state comptroller, who will need to certify it in a letter on Dec. 1. The plan probably won’t come before that happens, he said.
Barnes said it was too soon to say what would be on the table for potential cuts.
“Government spending. State government spending. That’s about as specific as I’m going to get,” he said. “... You act as if I have in my mind a full list of what we’re going to do and I don’t yet. We’re working hard to do that. Until we get through that process and work with the governor and make sure we’re right on what the deficit is going to be, it’s way premature for me to discuss what any kind of plan in the future’s going to be.”
House Republican leader Lawrence Cafero said no stone should go unturned as the governor examines where to cut state spending.
“I think everything has to be on the table. It has to be at this stage. In 2009 and 2011, we raised taxes in each of those sessions by, what, $3 billion plus? We’ve borrowed all we can borrow. There’s only one leg to the stool left—cutting spending, which we never did,” he said.
Cafero said it was important to preserve the social safety net as much as possible, along with making every effort not pass the burden on to the state’s cities.
Cafero accused Malloy of not having made substantial spending cuts since taking office. He said the savings estimated under last year’s state employee benefit concession package haven’t materialized either.
“We keep making the same mistake over and over and over again. The difference is we have a governor who’s big on bravado and spin, and tries to talk about ‘I, I, I. I did this, I did that. P.S., we’re right back where we started,’” Cafero said.
In addition to spending cuts, Cafero said he would start by weeding out fraud in the Social Service Department programs.
“Before you even cut spending lets look at the low-lying fruit and the fraud that went on. We have submitted that fraud is probably approaching a quarter of a billion dollars,” Cafero said.
He said Republicans were laughed at when they proposed hiring 20 additional Medicaid fraud officers. Their salaries would have been subsidized by the federal government and each could have been responsible for several million dollars in prevented fraud, he said.