Malloy Defends Spending Cap Changes, Draft Budget Agreement
Speaking Tuesday about the “framework” budget deal reached Friday with lawmakers, Gov. Dannel P. Malloy called critics of changing the state spending cap “a bunch of people trying to score cheap political points.”
The budgets proposed by the governor and the Democratic majority in the legislature have exceeded the state spending cap as its typically understood by more than $500 million a year. Both have proposed to redefine the cap in order to prevent Medicaid spending for which the state is reimbursed by the federal government from counting against the cap.
But the spending cap is included in the state constitution and a three-fifths majority vote in the legislature is required to amend the constitution. Initially, Malloy and the leaders of the Appropriations Committee sought a constitutional change but a three-fifths majority vote in the Senate is unlikely.
On Tuesday, the governor said the state would “live within the spending cap,” but he said he did not think a constitutional change would be required to prevent an influx of federally reimbursed Medicaid dollars from counting toward the cap.
Malloy accused Republican critics of redefining the spending cap of not “honestly” characterizing the issue and making a “false argument.” He said he doubted anyone who voted to establish the cap in 1991 intended for it to force the state to reduce spending based on an influx of federal dollars.
“Find me one person from the 1991 debate that said that if the federal government was to suddenly give us $500 million, that meant we had to cut education spending or aid to municipalities by an equal amount. This is a false argument. It makes no sense,” he said.
House Minority Leader Lawrence Cafero asked why, if that were the case, the spending cap has been interpreted a different way for more than two decades? He said in 2001 the legislature chose to exceed the spending cap, but handled it differently.
“We broke the spending cap. No one made any bones about it,” he said. “They needed 91 votes and … 22 votes in the Senate. Our constitution allows for legislatures to break the spending cap but you have to have a certain number of votes, you have to tell the world you’re doing it.”
Cafero said the governor, in proposing his budget back in February, acknowledged he would need to exceed the cap and sought to redefine it. He said the Appropriations Committee backed a similar proposal.
“Then politics showed they couldn’t get the requisite votes in their respective caucuses to do that, so they had a dilemma. The way they solved their dilemma was to ignore it, say ‘we’re not breaking the cap,’ and change the rules,” he said.
Securing the necessary support for a three-fifths vote did seem more imperative in April, when Appropriations Committee Co-Chairwoman Sen. Toni Harp said the super majority vote would be needed to implement the committee’s budget.
“Either that or it will be back to the drawing board with the budget, figuring out what else we can cut,” she said in April. “It’s a tough position. We’re going to have a caucus on Thursday to see what people would want to do if we can’t pass it.”
Rather than go back to the drawing board, Democrats have relied on a plan to budget based on the net impact of Medicaid spending after the federal government has reimbursed the state. Under the plan, the reimbursed money is never counted towards the spending cap.
On Tuesday, Malloy said his initial proposal gave lawmakers a way to “lock in a more standardized approach to the spending cap” through a three-fifths vote.
“I offered them an opportunity to do it. They didn’t do it,” he said.
House Speaker Brendan Sharkey said the issue comes down to whether the state is willing to pass up federal reimbursement. He said the change would align Connecticut with how most states with spending caps budget.
“When you look at the lists of states that have a spending cap, there’s always an asterisk next to Connecticut because we have this unusual way of accounting our Medicaid dollars,” he said. “... I think the important thing about this is from an accounting standpoint, if we don’t make this adjustment, we’re going to be leaving Connecticut’s taxpayer dollars in Washington.”
Although there are still details to be worked out over the final week of the session, Malloy said he and lawmakers have “an outline” of a balanced budget.
“The bottom line is we will not increase taxes or create any new taxes, the budget will be in in balance and will be [Generally Accepted Accounting Principles] complaint,” he said.
Malloy said it was “entirely possible” that budget would extend taxes that were scheduled to expire like the tax on electric generators.
Cafero rejected Malloy’s characterization of the budget. He said the state has so often ignored its transition to GAAP, “that it’s become a joke to everyone.” Cafero criticized the proposed budget for failing to sunset the generator tax and failing to prevent a scheduled increase in the gas tax, which will go into effect in July.
“I would argue with you it’s not GAAP compliant, it’s not balanced, and it does raise taxes,” he said.
Malloy pushed back against Republican critics Tuesday by taking a page from the state Democratic Party’s recent campaign to bait the minority party for not proposing its own budget this year.
“You’re quoting Republicans in this building who didn’t have the guts to put out a budget themselves? Give me a break,” he said.
Malloy said he and the legislature are continuing to work toward a budget which reflects the priorities of both. He said some interests, like the state’s hospitals, are not happy with cuts likely to appear in the budget.
“I think they want more money. That’s not an uncommon affliction in this building. I’m not sure you can ever satiate an industry that you’ve contributed 24 percent more to in each of the last three years, but hopefully they’ll understand what’s necessary to have a budget that doesn’t raise taxes,” he said.