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Malloy Defends Spending Cap Changes, Draft Budget Agreement

by | May 28, 2013 5:22pm () Comments | Commenting has expired | Share
Posted to: State Budget, Taxes

Hugh McQuaid photo 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.

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(7) Archived Comments

posted by: Noteworthy | May 28, 2013  6:50pm

I’m not a Republican and I don’t have cheap political points to score. I’m a taxpayer who will pay new and higher gas taxes; and whose utility bills will like go to new heights because of taxes that were to expire, are not. Those would be new expenses to my family.

Malloy is just wrong and arrogantly so. Give me a break!

As for the GOP budget - that’s a fool’s errand and a waste of time. Democrats control both houses and the governor’s chair. Last I checked, it is Malloy’s job to balance the budget within the law.

On the spending cap, any effort to sidestep the required 3/5th’s rule is a weasel move. Pure and simple. Malloy wants to welsh on the promise to taxpayers in order to get his way. If it was the right thing to do, given the pressures on them, Malloy should have been able to win over legislators. He didn’t, so now he reverts to Plan B and will now abort the Constitution in favor of the Weasel Rule. A couple of other points to make - nobody in 1991 envisioned Obama taking over healthcare. I don’t really care what other state are doing. I don’t live there. Other states have approved recreational use of marijuana too and don’t set prices on booze or tax the cars of its citizens past the day they bought it. Do I hear Sharkey and Malloy standing up for that? Give me a break.

posted by: Commuter | May 29, 2013  6:50am

What Malloy and Sharkey are saying is just common sense.

posted by: BrianO | May 29, 2013  8:23am

It is common sense that expense that is reimbursed should not be part of the cap. 

The 100% reimbursement is medicare, not medicaid.  If 100% of medicaid was reimbursed, we would have a $5 billion surplus.

The fact that the cap should not include medicaid/medicare reimbursement does not mitigate against the fact that we have an imbedded deficit tied to insufficient revenues to support a cost structure we cannot seem to ....shall we say “reorganize?”

posted by: dano860 | May 29, 2013  9:36am

If there was one thing and ONLY one thing that is not present in Hartford, it would be “common sense”.
We must remember common sense is not common!
Noteworthy is correct, mortgage, taxes on the home and property, insurance-health,home,vehicle,life, gas tax, fuel tax, meal tax, income tax, sales tax, utility tax, service tax on cable, phone & Internet, licenses to be in business, licenses to relax and fish or hunt….it goes on and on. The rocks are bled dry.
Now they are going to borrow. The millions in order to achieve GAAP? Boy, is there ever a lack of common sense.

posted by: timelord | May 29, 2013  10:45am

It’s shocking that both Danny Boy Malloy and Larry “I’m Irrelevant” Cafero are both right.

The Gov’s budget is full of lies and trickery AND the lazy, good-for-nothing Republicans didn’t bother to create a fiscally responsible budget to counter the Democrats.

So now Lazy Larry has two big strikes against him.  First, he directly attacked CT’s law-abiding gun owners by voting for the immoral gun control law.  Then he failed to perform one of the most basic functions of his office, moving the State government to a fiscally responsible path.

It’s hard to decide who’s worse for Connecticut, Danny Boy or Lazy Larry!  The only solution is to get rid of both of them as quickly as possible, along with Brendan Sharkey and Don Williams.

I suggest replacing all 4 of them with cardboard cutouts; they’d do far less damage to the state.  Cardboard cutouts aren’t currently defined as people so we can’t vote them into office, but we can just change the definition and everything will be fine.

posted by: mollyanme | May 30, 2013  6:40am

could someone please explain to me who the people of CT are who keep reelecting the same Politian’s year after year? I just don’t get it.

posted by: dano860 | May 30, 2013  8:25pm

So Dannel wants to remove those reimbursed dollars from the Feds on Medicade. Why not the reimbursed dollars from the Feds toward education? Why not the reimbursed dollars from the Feds on the roads?
Maybe because they aren’t real dollars until we actually get them!

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