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Malloy’s Budget Will Make Big Investments in Housing

by | Feb 14, 2011 6:00am
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Posted to: Housing, Labor, State Budget

Christine Stuart photo

Gov. Dannel P. Malloy

Over the past few weeks, Gov. Dannel P. Malloy has been preparing Connecticut residents and lawmakers for a budget that calls for “shared sacrifice,“ but a budget is also about priorities and one of Malloy’s priorities will be the largest single-year investment in supportive and affordable housing in two decades.

Malloy’s Budget Secretary Ben Barnes said Malloy will investment $50 million in each year of the budget in affordable housing and $30 million in the first year in supportive housing with the goal of building 150 new supportive housing units.

The investments in affordable housing and supportive housing will be made through the state’s capital budget, but there will be some additional operating expenses that go along with the commitment. Under Malloy’s budget proposal the state will spend $1.1 million in supportive services through Department of Mental Health and Addiction Services, and $1.5 million in new rental assistance subsidies through Department of Social Services each year of the biennium.

To say affordable housing advocates and those looking to end homelessness in the state were ecstatic would be an understatement.

“How many ways can I say, ‘this couldn’t be better‘,” Howard Rifkin, interim executive director of the Partnership for Strong Communities, said Sunday.

He said the Malloy administration understands that by investing in supportive housing the state reduces the long-term cost of emergency room visits, chronic homelessness, and other institutional spending that occurs when individuals are unable to find a permanent place to call home.

As for affordable housing, Malloy gets that it creates economic development and jobs, Rifkin said. There’s all kinds of testimonials from businesses all over the state that says if “we don’t give young professionals and working families a place to live businesses can’t expand and can’t attract and retain the people who are going to be their employees.“

Every $1 spent on affordable housing generates $10 to $12 in private economic activity, Rifkin said. Fifty-seven million in investments from the Housing Trust Fund has generated over $500 million in economic activity over the years, he added.

“There’s a leverage effect in putting dollars into housing,” Rifkin said. “Malloy gets that.”

Under former Gov. M. Jodi Rell’s administration, many supportive housing advocates were fighting to hold onto the $35 million in Connecticut Housing Finance Authority bonds, which are low interest loans purchased mostly by nonprofits and developers.
The goal of the bonding Rell had planned on doing in 2009 was to help build 150 units of supportive housing, however, when the state budget started to turn south Rell’s administration bailed on that commitment.

At the time her budget office argued, building the units of supportive housing would force the state to spend $6 million a year in rent subsidies and state services for the individuals living in the units.

But Malloy believes the money spent on affordable and supportive housing is a cost-effective-approach to addressing homelessness and housing affordability in the state.

As mayor of Stamford, Malloy supported the creation of what ended up being 3,000 units of affordable housing, Colleen Flanagan, Malloy’s spokeswoman, said.

She said Malloy understands that access to affordable and supportive housing helps individuals and families find stability and employment.

“It’s a win-win for the state,” Flanagan said.

It will also help the state to retain a young professionals and college graduates.

“Too often our young people, as they look to make lives of their own upon graduating from college or a trade school, are forced to move away from their families because they simply can’t afford to live here,” Malloy wrote in one of his campaign’s policy papers on the topic. “Inevitably, they end up not coming home.”

Budget Dribbles Out

Malloy has promised the media he won’t leave them in a “vacuum” leading up to his big budget address Wednesday, so one news organization at a time, the bits and pieces are starting to emerge.

Mostly spending cuts or investments, viewed as positive aspects of the budget, which went to the printer last week, have been leaked out over the past few weeks, but the “devil is in the details“ lawmakers say.

Early on Malloy announced he would maintain current spending levels, signaling he will cut close to $2 billion from the current budget and leaving approximately $1.7 billion to be made up in tax increases and revenue enhancements. None of the details regarding tax increases have been detailed yet by Malloy or his administration.

In a “Face the State” interview which aired Sunday, Lt. Gov. Nancy Wyman whose staff has been in charge of talking to the State Employees Bargaining Agent Coalition, signaled that the administration will be asking employees to open up the collective bargaining agreement.

In preliminary discussions the unions have presented the administration with cost-saving proposals, which are currently being calculated by the Office of Policy and Management. It’s unlikely based on Wyman’s comments Sunday that there will be enough to save the current salary and benefit levels of state employees.

The union has been careful not to entertain a discussion on the topic of wage and benefit concessions, but it looks like the conversation will be inevitable.

“As for wages and benefits, when management and labor work constructively together, as we have through our joint health care cost containment committee, we have saved hundreds of millions in dollars for the state,” Larry Dorman, union spokesman, said a few weeks ago.

Careful not to acknowledge it‘s willing to open up the collective bargaining contract, Dorman added, “Ultimately the key is for all of us to work together on behalf of our mutual goal of helping turn this state’s economy around by making the public structures upon which our economy depends more effective and efficient for everyone.”

The current contract regarding the wage concessions agreed to back in 2009 expires this June, while the benefit and pension portion, which includes the $42 billion in unfunded liabilities, doesn’t expire until 2017.

“For Connecticut to move beyond its current economic crisis, its budgetary crisis, we’re going to need to make headway with our employees on returning to a sustainable system of compensation and benefit allocation,” Malloy said earlier this month. He has already signaled he won’t commit to any early retirements and will fully fund the state’s pension liabilities.

Conn-solidation

Perhaps the most sweeping announcement Malloy made regarding the budget came last week when he announced his desire to consolidate 81 agencies into 57.

House Speaker Chris Donovan has said he’s glad Malloy is being “aggressive” about consolidation and his vision for the state. He said Democrats are also grateful to have a Democratic governor to work with on these issues.

Common Cause, which applauded Malloy’s efforts to consolidate, criticized his decision to put all the watchdog agencies, including the Freedom of Information Commission, Office of State Ethics, State Elections Enforcement Commission, Judicial Review Council, and Contracting Standards Board into the Office of Government Accountability, into one big agency.

“A proposal to merge the ‘Watchdog Agencies’ harkens back to the Rowland days,“ said Cheri Quickmire and Karen Hobert-Flynn of Common Cause CT. “It was a bad idea when Rowland proposed it, and it is a bad idea now.”

“The reality is that the Watchdog commissions, along with the Judicial Review Council and Contracting Standards board uphold the public’s interest as it applies to government, but they are distinct agencies with unique functions that do not overlap,” they added.

Malloy’s proposal to consolidate the Department of Environmental Protection and the Department of Public Utility Control has also received criticism from at least one Republican lawmaker.

House Minority Leader Lawrence Cafero, R-Norwalk, said to take the regulatory agency of the DPUC and put it under a commissioner appointed by a governor, “gives me some concerns.”

“DPUC is an autonomous body that we don’t even want the specter of politics to enter into,“ Cafero said in a visit to the Capitol press room last week.

“I would hate to see a day when DPUC is making decisions on rates, on overhead power lines in a particular community that could have any or even the appearance of politics based upon the whims of a commissioner appointed by a certain governor,” Cafero said last week.

Cafero described the proposal as “short on details,“ and if left him wondering where the savings were from combining the DEP and DPUC.

Malloy defended his proposal by saying there should be an executive branch agency whose goal is to “clean the environment, keep it cleaner, and lower the price of electricity so we can compete.”

As for Cafero’s criticism, “This is a guy, with all due respect to Mr. Cafero, if I remember correctly, he told me I should combine 47 departments into 11,’’ Malloy said. “ So just put that into your story for me.’‘

Malloy made those remarks one day before unveiling his proposal to consolidate 81 agencies into 57, a proposal Cafero has since applauded even though he remains skeptical of the DPUC merger.

Anticipating criticism, Malloy said he understands that in the land of steady habits making these types of changes will take leadership.

“This is the problem with Connecticut government,” Malloy said. “It’s been broken so badly for so long we’ve become used to creating new entities to do the job of the ones that aren’t doing the job.”

The estimated savings from most of the consolidations has been pegged at $10 million in the first year of the budget and that’s not counting the potential savings from the consolidation of two-and-four-year regional and community colleges, Malloy administration officials have said.

“Suffice it to say, we’re going to have to live on that in the second year of this budget,“ Malloy said of the savings. “We’re going to have to live on the creation of those efficiencies and downsizings in the second year of the budget. This is a very conservative budget for two years in a row.“

While the legislature still has to approve the consolidations, Malloy used his position at the bully pulpit to defend them.

“We have to push forward these consolidations. We’ve gotta make them work. They’ve got to lead to creation of efficiencies. That’s just a reality,“ he said. “For me to budget any way other than that would be a big red sign saying, I don’t expect it to work.“

“In a time of need, and this is a time of need, what we have to do is consolidate then hold people accountable to do their jobs,” Malloy added.

Municipalities

As for his proposal to hold municipalities harmless for the gap in education funding, Malloy has said he found the $540 million over the next two years to level fund the state’s portion of the Education Cost Sharing grant.

Where will that $540 million over the next two years come from? “We’re going to fill a hole. We’re going to reallocate assets from other expenditure areas to make sure we can fill this hole,” Malloy said.

Malloy refused last week to discuss possible cuts to other municipal aid programs, such as Town Aid Road or PILOT.

“The rest of the budget document will come out or be discussed on the 16th,” Malloy said

It’s anticipated Malloy will continue to roll out parts of his budget proposal on Monday.

An Earned Income Tax Credit

On Sunday the Courant reported that Malloy will reduce reimbursements for magnet school and new public school construction.

He’s also expected to implement a state Earned Income Tax Credit program, which will give money back to low-income individuals that earn below $21,500 per year. Families with three or more children that earn as much as $48,000 per year could still be eligible for a reduced credit that would be far below the maximum of $1,700.

The Courant reported that Barnes projected an estimated 190,000 low-income tax filers will be eligible in Connecticut, and the credit will cost the state $108 million in the first year and $111 million in the second year of the budget.

In a phone interview Sunday, Sen. Majority Leader Martin Looney, D-New Haven, who has championed a state EITC for the past several years, said he came close to negotiating one during budget deliberations, last year.

But Rell, as she had in the past, stood in the way, Looney said Sunday.

Supporters call the proposal not just a tax credit, but an economic stimulus plan.

The money that comes back would likely be recycled into the economy immediately, Looney has said. Since a lot of people who receive EITC are living essentially hand to mouth, the money would go to buy groceries, pay bills, fix a car or pay a landlord — it would be a stimulus in a time of an economic downturn.

Critics often argue the tax credit goes back to those that don’t pay any income taxes, but Looney said a larger percentage of poor and working families pay more in sales, gas, and other taxes.

A Better Choices Coalition report released last week cites a report from the Institute on Taxation and Economic Policy which showed the poorest fifth of Connecticut residents paid 6.3 percent of their income in sales and excise taxes, whereas the wealthiest fifth paid 0.7 percent of their income on sales and excise taxes.

The federal EITC has been touted by politicians red and blue, including Ronald Reagan, as the single most effective anti-poverty initiative. Formed in 1975 as a way to get the poor off the public dime and into the workforce, the federal program offers up to a $5,666 tax refund for people who pay income and payroll tax.

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(4) Archived Comments

posted by: City Hall Watch | February 14, 2011  8:11am

It is insulting to most of us that elected officials believe anybody including the poor, should choose to live in Connecticut and not contribute one dime to the shared costs of doing so.  It’s only in the twisted minds of career politicians and those working in the poverty industry, divorced from the reality, who construct the arguement around percent of income. Under this plan, the working poor will actually make money. According to the referenced study, they spend 6% of their income on things like sales tax - far less than the $1700 they’ll reap.

Further, there is nothing stimulative about paying your rent, your electric bill or buying food. Looking at this proposal and the governor’s embrace of its stupidity and pandering, we can be forgiven for thinking that to be a politician in today’s world, one must be devoid of their common sense and even base line intelligence not to mention sense of fairness.

One more point: If I read one more story where some special interest claims some ten fold return on investment for a social program like affordable housing, I’ll choke. The only studies that support that are their own spin and have little if any basis in fact.

posted by: ... | February 14, 2011  10:05am

...

Yea this isn’t something I can be on board with. While the poor are surely suffering in our weak recovery, I can’t support providing money to non-tax payers unless the budget will be fully balanced, or it is clarified this spending offsets cutting to a similar program.

However CHW a family making the maximum 48,000 spending the base average .063% of their income on sales tax does exceed the 1700 they would receive. But for the individual non-taxpayer making 21,500 or less, it doesn’t add up or make fiscal sense to me.

And I agree with you as well regarding the listed items called ‘in state spending’, specifically electricity, as we get most of our electricity from out of state providers and they are the ones making the profit.

But I’m sure the sales tax revenue low-income families provide to the state goes more than to rent and utilities, or even the items Looney lists. Clothing, car repairs, restaurants (fast food and sit down), and other items are fairly direct and flow within our State economy. Not to the immediacy or efficiency we so desperately need however, so I hope this proposal is refined properly to the fairness of those who are funding this program (the CT taxpayer), if it passes at all.

posted by: OutOfOutrage | February 14, 2011  4:14pm

OutOfOutrage

Wow, how lucky are we that the state is able to get in on the ground floor of this lucrative investment opportunity.

posted by: PatrickT | February 15, 2011  7:17am

I really wish that people would stop mis-using the term “investment” when the correct term is spending.