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Budget Bill Changes How State Will Estimate Deficits and Surpluses

by | May 16, 2016 9:30am () Comments | Commenting has expired | Share
Posted to: State Budget, Special Session, Taxes, State Capitol, Transparency

Christine Stuart file photo On the campaign trail in 2014, Gov. Dannel P. Malloy was critical of how the legislature’s Office of Fiscal Analysis estimates future budget deficits, but the budget adopted last week by the General Assembly changes that practice.

Currently, legislative budget analysts estimate future growth based on current spending. It assumes the state will spend the same amount of money that it spent the previous year, which, according to Malloy, made it seem like the deficit was much bigger than it actually was.

The budget adopted by the General Assembly would require budget analysts to report how much needed to be cut from current spending to meet fixed cost drivers, such as debt service, Medicaid, pensions, and other entitlements.

“This will result in more realistic estimates of spending in the future,” a press release from Malloy’s office states.

Malloy administration budget director Ben Barnes has said previously that it’s not accurate to report future deficits for spending that hasn’t occurred.

“There’s no such thing, in my view, as a deficit or a surplus in years in which there is no appropriation in place,” according to Barnes.

Using that argument, however, means Malloy didn’t really inherit a $3.67 billion deficit from former Republican Gov. M. Jodi Rell — it would have been smaller under the new method.

The Malloy administration maintains that the amount of spending done the previous year shouldn’t impact the amount of money the state plans to spend in the future.

The size of the projected deficit was an issue in Malloy’s 2014 rematch against Republican Tom Foley. Malloy maintained that there would not be a budget deficit. But in the weeks following the election the state was facing nearly $100 million in red ink. The Office of Fiscal Analysis, using the current services approach, estimated at that time that Connecticut would face a $1.2 billion deficit in 2016 and a $1.4 billion deficit in 2017.

The 2016 budget is still running a $256 million deficit, which likely will be closed using the state’s Rainy Day Fund. The 2017 budget, which the General Assembly adopted last week, will still be running a $1.26 billion deficit in 2018 and a $1.47 billion deficit in 2019.

House Minority Leader Themis Klarides, R-Derby, said she’s confused about why the state would want “less transparency, instead of more transparency.”

Christine Stuart file photo Klarides said the more information lawmakers can have the better they can plan for the future.

“The fact that they want to give us less information is contradictory,” Klarides said.

But Malloy maintained that it was a better way of reporting budget numbers.

“This is a critical, structural reform that changes how we will do business in the future, and it’s another step toward making the long-term reforms that we need to implement to be successful both now and down the road,” Malloy said Thursday.

The change essentially will make it harder for lawmakers to vote on a budget that maintains the same level of service.

“By including changes to future budget calculations that willfully ignore the realities of inflation and cost increases, this is a job-killing budget for local communities too,” AFT Connecticut President Jan Hochadel said. “The consequences for towns and schools will be severe — gutting public education and health and safety services, and laying off thousands more local teachers, first responders and road repair workers.”

Unions were critical of the change to how the state estimates budgets, but lawmakers didn’t adopt a provision that would require them to vote on labor contracts.

Malloy said he supports the idea, but Democratic legislative leaders have continued to quietly rejected the idea, which is opposed by labor.

“As I have said before, we also must consider mandatory legislative approval of labor contracts as well as finally enacting the constitutional spending cap the voters approved decades ago – these are things that I would support if passed by the legislature,” Malloy said last Thursday.

Union leaders have continued to call on the General Assembly to respect the collective bargaining process as it currently exists. In March, they withdrew a contract for about 1,900 non-teaching employees at the University of Connecticut when it looked as if the Senate was going to vote down the contract. It was have been the first vote the General Assembly had taken on a contract in years.

Meanwhile, despite calls from Republicans, the General Assembly also failed to implement a constitutional spending cap, which voters overwhelmingly approved in 1992. Last December, the deficit mitigation plan they approved set up a commission to study the issue, but Republicans don’t believe it’s an issue that needs to be studied. The General Assembly should just implement it.

Attorney General George Jepsen has opined that the current spending cap has “no legal effect.”

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