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