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From Davos Malloy Defends Budget, Says OFA Is ‘Wrong’

by Christine Stuart | Jan 26, 2012 5:03pm
(17) Comments | Commenting has expired
Posted to: State Budget

www.swiss-image.ch/Photo by Andy Mettler

DAVOS-KLOSTERS/SWITZERLAND, 3JAN12 - Aerial view of the mountain resort Davos/Switzerland where the World Economic Forum Annual Meeting 2012 will take place January 25 - 29, 2012. Copyright World Economic Forum (www.weforum.org)

(Updated 5:42 p.m.) Gov. Dannel P. Malloy phoned Connecticut Thursday from the snowy Swiss Alps and told reporters that he thinks the nonpartisan Office of Fiscal Analysis has it “wrong” when they pegged the budget deficit at $145 million.

“We’re confident based on current numbers that we’re dealing with that we’ll end in the black,” Malloy said. “They have chosen specifically not to recognize that as a result of our salary freeze and our better than anticipated retirement program we have about $120 million in the salary adjustment account.”

He said when that is applied the lion’s share of any differences between the Office of Policy and Management and the legislature’s Office of Fiscal Analysis disappear. He said he’s not announcing any addition cuts because “they’re not necessary at least not at the moment.”

He said the report released Wednesday by OFA just shows the difference in how they recognize excess money as opposed to how OPM recognizes excess money.

“We think that we’re going to recognize the savings we have built in the budget,” Malloy said.

That includes the savings which are part of the union concession deal, which the administration has admitted may fall short because a greater number of employees than anticipated participated in the Health Enhancement Program.

“We were surprised at how many people went into an insurance program that ultimately will pay larger dividends than we anticipated by the mere shifting of that service, but in the short term does cause us to have to recognize savings elsewhere,” Malloy said.

The Malloy administration had anticipated employees would be paying higher premiums and deductibles for their health insurance because they would opt out a system that helps promote health and the use of a primary care physician rather than an emergency room.

The concession deal assumed 50 percent of employees would enroll in the program and 50 percent would opt out of the program and pay an estimated $1,200 more in premiums per person and a $350 deductible. That didn’t happen. Instead, 96 percent of state employees enrolled in the program, which .

The Office of Fiscal Analysis is expected to release a report Friday on how many of the savings from the labor deal it anticipates will come to fruition.

But even if OFA is right about the deficit, Malloy said it’s still less than one percent of the $20.14 billion state budget.

Sen. Minority Leader John McKinney sent out a statement Wednesday evening criticizing the Democratic governor for his handling of the budget and the current deficit.

“After passing the largest tax increase in state history, Democrats have still managed to spend us into deficit,” McKinney said.

Malloy said his administration exceeded retirement numbers this year and he didn’t do what previous Republican administrations have done, which is offer an incentive to retire and delay payments to the pension system.

“Sen. McKinney can say what he wants to say, but it was my job to slay a $3.5 billion deficit under the worst case scenario,” Malloy said.

McKinney fired back Thursday saying he never supported early retirement incentives or delaying payments to the pension fund. He said it was the Democratic majority and the previous Republican governor who did that.

“I would love to debate governor on my record and his,” McKinney said. “Maybe the governor should come back from Switzerland and pay attention to what‘s going on in Connecticut.”

House Minority Leader Lawrence Cafero, R-Norwalk, said he asked OFA about how much the state will save as part of the pension package it offered to the unions.

Malloy says it will save more than $21.5 billion over the next 20 years, but Republicans are skeptical and OFA has been unable to validate some of the savings included in the plan. Cafero said if OFA says Friday that it’s millions of dollars short of projections, then the state will have a huge budget hole to fill.

Before flying to Switzerland this week Malloy proposed contributing $125 million more to the pension fund this year to improve its liabilities. Cafero said the problem with that is the additional money will be coming from taxpayers. He said Malloy may have announced those plans in order to “camouflage what we’re going to find out.”

East Haven

During the 20 minute conference call Malloy also weighed in on East Haven Mayor Joseph Maturo’s remarks that he would help the Latino community by having “tacos” after four of his officers were arrested by the FBI for targeting Latinos in that community. Malloy called the remark “repugnant” in a statement Wednesday.

“It was pretty boneheaded,” Malloy said. “I have to question how committed he is to his job given, he should have seen this coming. He should have prepared for it. He should have responded in a different way.”

Malloy said the people of his community have elected him and he has not repeated those “boneheaded remarks and, in fact, has made an apology.”

“One would hope he would not repeat those kinds of behaviors again,” Malloy said.

Rubbing Elbows

Meanwhile, Malloy has some familiar company with him in Davos, aside from Department of Economic Development Commissioner Catherine Smith, he’s rubbing elbows with Yale University President Richard Levin and Harvard University’s Michael Porter.

He will also be meeting with officials from UBS, which has its North American headquarters in Stamford. Malloy gave the Swiss investment bank a $20 million forgiveable loan last year.

Malloy said he also attended German Chancellor Angela Merkel’s speech on turning around the European economy, which is one of Connecticut’s biggest trading partners.

He’s also had a number of meetings with businesses looking at locating on the East Coast. He said he’s touting Connecticut’s ability to solve its structural budget problems to everyone he meets at the World Economic Forum.

Malloy spoke to reporters around 2 p.m., which was 8 p.m. in Switzerland. He said he believes he’s one of four governor’s attending the conference, but isn’t certain. The only other North American governor he’s run into is Colorado’s Gov. John Hickenlooper.

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(17) Comments

posted by: Disgruntled | January 26, 2012  5:31pm

Is UConn paying for the phone calls?
We KNOW Dan is not digging into his pocket for expenses.
Davos…perhaps Dan attended not for the wine tastings and chocolates and cheese but because Connecticut is sort of like an EU nation and he is looking for pointers on defaulting.

posted by: mariner | January 26, 2012  6:50pm

Gotta love it…everybody is wrong except for Malloy.  Moodys is wrong. OFA is wrong. We are not even through the first year of his budget which contained the largest tax hike in CT history and virtually no spending cuts..as a matter of fact, they increased spending.  The terms shared sacrifice only applies to us hard working families as we share the sacrifice of higher taxes.
Maybe we should be thankful that Malloy is following his yellow brick road right to Washington..although we don’t really need him there either, but his voice will be swallowed up in the halls of the hill.

posted by: NOW What? | January 26, 2012  7:37pm

“mariner” - Actually, Malloy is correct. OPM and OFA *ALWAYS* issue different projections during the course of any given fiscal year… because they’re essentially SUPPOSED to (those agencies’ official purposes, missions and methods of operation were DELIBERATELY DESIGNED/intended to be different) - to help make sure that the State doesn’t ever ACTUALLY end a fiscal year in the red. Their numbers NEVER really start to converge until we get closer to the end of each fiscal year, because the data that each agency is supposed to use in its calculations is considerably different. It’s *always* the minority political party (which always knows the truth of this situation) and the news media (which does NOT know of these technical yet important differences between these two agencies) that cause all of the commotion and confusion during the course of each fiscal year.

So RELAX. The FY will end BALANCED and WITHOUT any need for additional taxes or fees, with ONLY additional spending cuts if necessary to accomplish it.

posted by: Noteworthy | January 26, 2012  9:02pm

My eyes roll in the back of my head reading Malloy’s fiscal analysis from MT. Davos. With all those new taxes and still a deficit, how is it even close? Massive spending and borrowing that makes previous spending look puny.Amazing.

posted by: ... | January 26, 2012  9:08pm

...

Hit the nail right on the head NOW What?

And if their isn’t a calculated affect of the wage freezes on the OFA’s budget analysis, this correctly leaves out a significant portion of the budget reduction strategies implemented by the Malloy administration to keep the states coffers balanced.

posted by: perturbed | January 26, 2012  9:38pm

perturbed

Ever notice how people that change their usernames in an attempt to deceive are inherently dishonest?

SteveHC, that’s the most tortured logic I’ve ever seen out of even you.

(Thanks for the chuckle, though.)

—perturbed

posted by: Katydid | January 26, 2012  11:57pm

Wait - I thought Malloy and the Democrats represent us “99 percenters”.

What is he doing in Davos rubbing elbows with the 1% of the 1%? It doesn’t get more elite than this group does it?

posted by: ... | January 27, 2012  12:43am

...

Nope I haven’t Perturbed. But I have noticed people bring up miniscule, unrelated complaints that are neither relevant, nor rational to make anymore in a discussion about solving our state finances and understanding the calculation processes of the OPM and OFA.

posted by: perturbed | January 27, 2012  7:04am

perturbed

Do you really want to discuss the calculation processes of OPM and OFA, jonessAC12?

(I did noticed you didn’t want to discuss Ojakian’s dishonesty anymore, after it was proven that he lied about the SEBAC agreement. But I digress again…)

Okay, I’m game, please help me make sense of SteveHC’s gibberish. Was he trying to say, in not so many words, that OFA must use real numbers, but OPM can use make-believe numbers? Because as near as I can tell, a great deal of the FY 2012 and 2013 savings OPM identified in the SEBAC 2011 agreement are complete fabrications. The OFA seemed to think so, too.

Here’s OPM’s book of lies (or was OPM simply reporting the lies Ojakian and SEBAC agreed to concoct together?): SEBAC Agreement Summary

And here’s a sampling of some differences between the two agencies causing “commotion and confusion”:

Provision 17: OFA couldn’t figure out how the wage freezes would result in over $69M savings in required pension fund contributions in 2012 alone. Could you explain how we’re doing on those savings? Who’s closer so far?

Provision 2: OFA couldn’t figure out how OPM could claim over $32M in 2012 savings due to slashing our minimum COLA by 20%. In OFA’s words: “If we are currently assuming COLA increases above the current minimum of 2.5%, how will lowering that minimum generate any savings?” So how are we doing with those savings? I sure can follow OFA’s question, but I never saw a response by OPM. Are we still pretending this results in any savings at all?

Provision 3: OFA couldn’t confirm the $35M in savings in 2012 from doubling the early retirement penalty. Will all become clear later?

Provision 10: OFA questioned the SEBAC/Ojakian assumption of 50% non-participation in the HEP. Good question! There was—in reality—only a 4% non-particpation rate. Looks like 92% of the $102.5M in savings from (refusals to join) the HEP got vaporized. Am I missing something? Does OPM still insist those savings are lurking somewhere?

Provision 14: How’s that “negotiated” (there’s Ojakian’s hand again) $40M savings doing? Does OPM plan to “negotiate” with the state’s accountants to balance the budget? Or does the term “negotiated number” simply mean Ojakian and SEBAC reached an agreement on the magnitude of the lie they thought they could get away with at the time?

Provision 20: How are we doing on the $40M savings from new technologies? Seems tough to quantify, but I guess we’ll all know in the end.

Provision 21: Ah, the famous suggestion box savings. Estimated at $90M per year, how far have we come on the suggestion box savings so far? Has a committee even met more than once? Is a committee roster finalized yet? Where are the savings coming from?

Any help you could provide in understanding OPM’s numbers would be appreciated. Though for all I know, nobody in either OPM or OFA is counting on these fabricated numbers anymore.

—perturbed

PS: Are furlough days looking like a more efficient way to produce FY 2012 savings than slashing our pensions yet? I wonder how things would have turned out if our trusty union bosses didn’t talk Malloy out of that idea.

PPS: Is Ojakian ready for another promotion yet?

posted by: Noteworthy | January 27, 2012  10:54am

Malloy seems to be in denial. I’ll point out that OFA was correct months ago in their review of the budget “savings” which is why there is a deficit now. When you have a massavie escalation in taxes and are still running a deficit even with a built in surplus, there is clearly a problem and the promised savings were not real. Now it is time to get honest about it. When pigs fly I’m sure.

posted by: ... | January 27, 2012  11:29am

...

Because I do not work for either operation perturbed, I cannot fully explain everything you have rambled about. However, I’ll do what I can (not to your satisfaction though, since it has been historically established nothing I, nor anyone in the administration could put forward to you would convince you otherwise)

If the savings based on the wage freeze are not calculated into OFA estimates because of information OFA has deemed too incomplete for their offices to implement, that is their prerogative. But they even admit themselves that if they calculated that factor in, the savings could be even greater after the 2 year period than what OPM stated from the deal. They ask this question of OPM, which they are (I’m sure) preparing a response to all the legitimate that OFA raised.

I honestly couldn’t and shouldn’t go any further than discussing that though. Because honstely as I read down, you’re list of concerns are essentially re-asking what OFA is now requesting, with a bit of rhetoric mixed in to continue a negative light on the deal.

But I’ll say it a bit more bluntly perturbed: nobody cares if SteveHC has changed his username to NOW What? (you can tell because he has no interest in responding to you). I may find it funny every now and then when someone gets their account blocked/banned and has to make a new one, but your banter about it is getting tired and old.

posted by: perturbed | January 27, 2012  9:09pm

perturbed

Just calling out the B.S. where I see it, jonessAC12. SteveHC/NOW What? is a chronic offender for some reason.

BTW, I don’t doubt your sincerity, just your ability to recognize or acknowledge the truth when presented (or hit over the head) with it. (The Ojakian lie is a prime example.) As far as convincing me goes, I find factual information and plausible arguments pursuasive, blind loyalty to charlatans and dis-proven beliefs not so much.

Oh, one more thing—that chart of the SEBAC 2011 “savings” was from June 2011. As of August 9, 2011, the OFA still hadn’t gotten any reasonable responses from the SEBAC/Malloy team.

However, now somehow, the estimated long-term pension savings over the next 20 years has dwindled from over $8 billion, identified at the bottom of p. 2 in the chart I linked to above, to a mere $4.8 billion in ctnewsjunkie’s latest report: Legislative Analysts Say Malloy Won’t Achieve Pension Savings. And the OFA says most of that is bogus, unless Malloy’s latest proposal for a stepped up contribution rate is implemented. I sure hope those lower estimates aren’t for the very same set of concessions valued at $8 billion (by SEBAC/Ojakian) just last year. They were too painful to be so meaningless.

—perturbed

posted by: NOW What? | January 28, 2012  7:02am

For the record, I’ve never been banned or blocked from any website anywhere on the Internet. However, some others who have “replied” to some of my posts here and there *have* been blocked etc. due to the inappropriate content of their posts. One obviously unstable person even went so far as to post a downright threatening reply to me (using foul and insulting language, of course) on another publication’s website (from which they were ultimately banned). Beyond that, I limit my posts’ content as much as possible to that which is directly relevant to the article or opinion piece at hand. FWIW, I do not share the minority view that all of Connecticut’s current ills and woes stem from the current SEBAC agreement; nor do I believe that those ills and woes would be “cured” by any *other* type of revised SEBAC agreement.

posted by: perturbed | January 29, 2012  9:20am

perturbed

NOW What?/SteveHC (may I still use simply SteveHC? That’s how I know you best, and the name doesn’t require punctuation)wrote:

“However, some others who have “replied” to some of my posts here and there *have* been blocked etc. due to the inappropriate content of their posts. One obviously unstable person even went so far as to post a downright threatening reply to me (using foul and insulting language, of course) on another publication’s website (from which they were ultimately banned).”

Hmmm… That’s actually not surprising. People generally don’t appreciate lies and deceit.

Speaking of which, do you have any “directly relevant” information on the differences between OPM’s numbers and OFA’s numbers from the SEBAC 2011 summary of short term cost savings? Whether the two agencies are never “SUPPOSED” to come up with the same numbers or not (good grief), in retrospect, the SEBAC/Ojakian numbers OPM reported sure seem like, well, lies and deceit.

Could you provide anything specific—beyond unsubstantiated opinion—to help us understand, for example, how lowering the minimum COLA to 2.0% resulted in an estimated cost savings, if we were already assuming COLA increases above the former minimum of 2.5%?

Or perhaps you could fill us in on the status of the $180 million two-year savings from the suggestion box. Even in retirement, you still keep up with your union buddies, right? As of last October, they were still “in the process of setting up the structure for that committee.” See the story here: State doesn’t wait for overdue union efficiency ideas. Have they met yet? (Why bother, right? Both Malloy and SEBAC knew all along that was bogus. SEBAC got it’s pooling bill, Malloy got state workers’ pensions slashed. All involved were just hoping this little lie would fade away.)

“Transformation takes place over the long-term,” said Bob Rinker—though he accounted for it in the short term. Jeff Skilling would have been proud.

Well, I don’t know if I’m in the minority, or the vast majority, in thinking SEBAC 2011 did little of what it was purported to do for the current budget crisis. But I do know slashing our pensions didn’t help this year’s budget. Wrong long term tool for the short term job, SteveHC, even if your pension is safer now.

—perturbed

posted by: Disgruntled | January 29, 2012  5:49pm

While in Davos I read that he spent time with PHIL GRAMM (works for UBS now) and seemed impressed.Hmmm…any point in asking if UBS will return jobs to Stamford or money to taxpayers? The man who pretty much was responsible for the repeal of Glass-Steagall,married to Wendy,slave to Enron!
With friends like those,who needs a governor?! That said,we really do not have one in Hartford very often.

“Connecticut Governor Dannel Malloy(D) and three former governors are among those scheduled to take part next week in a conference sponsored by Governing Magazine at the National Press Club in Washington, D.C.”

posted by: NOW What? | January 30, 2012  2:19am

Apparently I need to explicitly state that not only do I restrict my comments to those which would be directly relevant to the article or op-ed piece at hand, I also do not respond to other posters’ questions or statements that are not directly relevant to the article or op-ed piece at hand, not to Internet trolls (“trolls” meaning people who deliberately posts inflammatory, extraneous, or off-topic messages in an online community, discussion forum, chat room, or blog, with the primary intent of provoking others into an emotional response or of otherwise disrupting normal on-topic discussion).

posted by: perturbed | January 30, 2012  9:02pm

perturbed

That’s OK, SteveHC.

Obviously, if the Malloy/SEBAC team can’t provide any responses to the multitude of legitimate questions concerning the creative Enron-style accounting they used in the SEBAC 2011 agreement, I didn’t really expect you to have any answers. Though I will admit I was hoping you’d at least make an attempt.

wink

—perturbed