Legislative Analysts Say Deficit Is Bigger Than Initially Thought
(Updated 8:29 a.m.) If you believe the non-partisan staff at the legislature’s Office of Fiscal Analysis, Connecticut’s budget picture is worse than anyone could have imagined.
Late Wednesday night the office pegged the current general fund deficit at nearly $145 million. It said the amount reflects an estimated net increase in spending of $130.7 million, and a net reduction in revenue of $94.7 million.
However, the numbers don’t include the nearly $79 million in rescissions Gov. Dannel P. Malloy released earlier this week in an effort to try and keep the budget his first budget in the black and in compliance with Generally Accepted Accounting Principles.
The Office of Fiscal Analysis is conducting an analysis of the rescissions and is expected to let lawmakers know if any of them overlap with existing lapses.
Office of Policy and Management Secretary Ben Barnes admitted Tuesday that some of the $79 million in rescissions may have already been counted as lapses. Early Thursday morning he released this list which shows about $44 million of the $79 million have already been counted as lapses and about $34 million are new spending cuts.
As it stands currently, OFA believes “The budget is heavily reliant on budgeted lapses to achieve balance.”
A lapse is an unallocated sum of money, which has been held back so it can’t be spent and it’s a normal occurrence in any budget. But this year’s lapses were larger than in previous budgets because many included targeted savings which were part of the union concessions deal.
“Of the $777.9 million budgeted, we have been able to identify $651.4 million in lapses,” OFA wrote in its report Wednesday. “About five months remain in the fiscal year and the remaining $126.5 million may still be achieved through various savings or budgeting mechanisms.”
The remarks about the lapses support the argument Republican lawmakers made earlier this week.
Sen. Minority Leader John McKinney, R-Fairfield, said Tuesday that he believes as much as $41.7 million of the governor’s proposed rescissions have already been identified as lapses. That leaves about only $37 million in new reductions, which means the budget will still be out of balance after Malloy makes the cuts.
Malloy has the power to cut up to 5 percent of any one line item in the budget without legislative approval. Before leaving for Switzerland Tuesday Malloy released the list of nearly $79 million in rescissions.
“Now Governor Malloy has a $145 million budget hole - $220 million if he intends to keep his promise to comply with GAAP - and only $32 million worth of ideas to fill it,” McKinney said Wednesday in a statement. “His math simply doesn’t add up.“
The Office of Policy and Management admitted the state’s revenues are declining and under GAAP the state is experiencing a deficit of $73.6 million, but has yet to put a number on any estimated increases in spending.
In his Jan. 20 letter to state Comptroller Kevin Lembo, Barnes wrote that OPM is now projecting two significant net deficiencies in the account that funds health care for retired state employees, and a shortfall is also expected in the account that funds pension payments to state employees. Some of those shortfalls are related to changes in the State Employees Bargaining Agent Coalition agreement and the 2,700 retirements that followed.
But no numbers were attached to those potential deficiencies.
“Secretary Barnes is confident in OPM’s numbers,” Andrew Doba, Malloy’s communications director, said Wednesday. “He hasn’t had a chance to review OFA’s analysis, but he respects their work.”
Meanwhile, Democratic lawmakers expressed confidence in Malloy.
“Connecticut’s budget will be balanced through the rescissions Governor Malloy has already proposed and other savings that the legislature will enact if necessary,“ Sen. President Donald Williams, D-Brooklyn, said in a statement Wednesday.
“Republicans who are pointing fingers of blame should remember that if the legislature had enacted their alternative budget the state would be facing nearly $1 billion in red ink through their smoke and mirrors budget tricks and borrowing,“ Williams said.
House Minority Leader Lawrence Cafero, R-Norwalk, stressed Tuesday that it’s not so much about the budget the Democrats passed without the support of Republicans, but it’s about the legislature’s role in the budgeting process.
“We as a legislature have an obligation,” Cafero said. “We have to balance a budget.”
But it’s hard to do when the Office of Fiscal Analysis can’t get a straight answer from the governor’s Office of Policy and Management, he said.
He said he understands the governor may prefer it that way, but the legislature is one of the three branches of government.
This year’s $20.14 billion budget was projected to finish with a surplus of $83 million earlier this month, but lower than expected income tax and capital gain receipts pushed it into the red. Republicans have also expressed concern that other tax revenue is coming in under projections.
However, Rep. Vincent Candelora, R-North Branford, said “it’s hard to tell when there’s a lack of checks and balances between the legislative and executive branches.”