As they scramble to deal with rejection of the union concessions deal, Gov. Dannel P. Malloy and legislative leaders are in the position to having money to fill at least part of the $700 million hole it leaves, but a big constitutional obstacle to using it.
The state is looking at more than $150 million in projected surpluses across this year and next, as well as new signs that tax revenues are running tens of millions of dollars ahead of expectations. But Malloy and legislators can't spend more than $1 million of that bonus next fiscal year without running into the constitutiomal spending cap.
"The big promise I made is that we would have a balanced budget," Malloy told reporters Friday morning outside his Capitol office, moments after the State Employees Bargaining Agent Coalition announced unions had rejected the tentative concession plan. "And we are going to have a balanced budget."
That means the governor and legislature must plug holes of $700 million in the $20.14 billion budget adopted for the fiscal year that begins July 1 and $901 million in the $20.4 billion package for 2012-13. Those are the savings that were supposed to come from a two-year wage freeze, new restrictions on health care and pension benefits, an employee wellness program and various management-labor cost-saving committees.
Unfortunately for Malloy, those annual spending plans are $1 million below the cap in the first year and $278 million below in the second. Any new spending approved above these amounts triggers both procedural and political challenges.
The legislature adopted a statutory spending cap in 1991 to temper voter frustration over the new state income tax. Voters would add the cap requirement to the state Constitution one year later by adopting the 28th Amendment.
But the cap, which is supposed to keep spending increases for most purposes in line with the annual growth in personal income, also can be circumvented if the legislature and governor see eye-to-eye.
If the governor signs a declaration of fiscal "exigency," effectively declaring a budgetary emergency, the legislature can expend dollars in excess of the cap with a 60 percent vote in both chambers. That means 91 votes in the 151-member House and at least 22 out of 36 in the Senate.
Malloy's two Republican predecessors, M. Jodi Rell and John G. Rowland, routinely teamed with Democrat-controlled legislatures to legally exceed the cap. Under those administrations nearly $3.8 billion in excess of the cap was appropriated between 1998 and 2009, according to state budget records.
But would the Malloy administration attempt to do so?
The new governor's budget director, Office of Policy and Management Secretary Benjamin Barnes, said "it's not the kind of alternative budget the governor would support. I have no reason to believe we would look to exceed the spending cap."
Malloy decried many of the fiscal practices of Rell and Rowland during last fall's campaigns, saying they contributed to the problems he inherited. Those include the $3.67 billion deficit originally built into the 2011-12 budget and huge unfunded obligations in the state employee pension fund and retiree health care program.
Senate Minority Leader John P. McKinney, R-Fairfield, said Thursday that Malloy should be able to manage with fewer than 7,500 layoffs and no municipal aid cuts to re-balance the budget.
But McKinney said there's no need to exceed the spending cap, arguing Malloy and the Democrat-controlled legislature need to consider other programmatic cuts throughout state government.
The GOP leader said that if Malloy does ask lawmakers to exceed the cap, "it would be a continuation of many fiscal contradictions by the governor."
McKinney also predicted that if Malloy were to risk the political criticism he would face for trying to break the cap, he would fail in the attempt. "He wouldn't get the votes in the Senate," McKinney said.
Though Democrats control 22 out of 36 seats in the Senate--enough to override the cap--three Democrats already have voted against the biennial budget at its current level: Edward Meyer of Guilford, Gayle Slossberg of Milford and Joan Hartley of Waterbury.
Slossberg said that while she would weigh any specific budget adjustment proposal before deciding, "I think it's an accomplishment to have stayed below the cap."
And though Meyer said "the spending cap is not what I live my public life by," he added that he also believes the answer to balancing Connecticut's budget lies with spending reductions. "We need to focus on downsizing those agencies that are bloated."
Hartley could not be reached for comment.
Malloy again emphasized Friday that state employee layoffs, to be announced as early as next week, would be his primary means of cutting costs and plugging those budget gaps.
But the governor also wants legislators to temporarily expand his emergency authority to reduce spending levels unilaterally across the budget, including normally-exempt municipal aid. The governor's fellow Democrats in the legislative majority declined to grant him that power during the regular session.
Still, Malloy could mitigate this problem somewhat by tapping into some pots of money already at his disposal - were it not for the cap.
The budgets for the next two fiscal years are designed to run $89 million and $555 million in the black, respectively.
Malloy and lawmakers did stipulate that $75 million of that first surplus, and $50 million of the second, be reserved to help with the gradual conversion of state finances to Generally Accepted Accounting Principles, a series of financial guidelines that emphasize transparency and accountability.
But state government would need an extra $1.5 billion in its coffers to be GAAP-compliant, and doesn't plan to start amortizing that differential until 2013-14. The $125 million assigned from the next two projected surpluses to the GAAP conversion only is designed to effectively freeze that $1.5 billion margin in place, covering inflationary increases.
Still, the governor and legislators could redirect some or all of both of those projected surpluses to compensate for the failed concession deal. The administration also projected earlier this week that the budget for the current fiscal year, which ends on June 30, is on pace to finish $86 million in surplus.
Lastly, the administration also reported that General Fund revenues jumped $53 million over the past month alone, including $40 million from the state income tax. Republican lawmakers have argued that tax revenue forecasts built into the next two state budgets were underestimated and don't reflect this growth.
If there is extra money ... we are being over TAXED!!!
This administration (Rs and Ds) all need to be voted out! They are toxic to the state of CT's economy and future. Where are the values and principles of this bunch?
Get involved and vote all incumbents out in the next election.... here in CT and on the federal level too.... ENOUGH is ENOUGH!!!
Yeah, he wants a balanced budget................BALANCED ON THE BACKS OF THE HARD WORKING STATE EMPLOYEES AND NOT A SACRIFICE THAT IS SHARED BY ALL.......He's made that quite clear!
Yes god forbid they should ACTUALLY CUT SOMETHING like welfare benefits. the freeloaders would not be able to buy new cars, fancy clothes, jewelry and get their nails done. Something most working people can only dream about we are left paying the bills. Wait till that big tax increase coming in August.
We are all frustrated that the majority in two unions decided to vote against concessions - Well, I imagine the no voters aren't frustrated. They felt that somehow a bunny would be pulled out of the hat and all weould be well. I have news for them: there is no Easter Bunny.
Now comes the hard part. I would very much like it if those who are laid off are the ones who voted no. But life isn't fair. Quite a few yes people will be laid off. If Gov Malloy decides to cut aid to municipalities,
Read MoreJulierealist, One thing... The Naysayers had the right to say no. I said yes. I said yes for me and my child. My only proble with the no votes is that the ones who did this because their retirement age will be increased by a few years and that they dont want to go to the dr is selfish. Hey, if they dont need a doctor then opt out of state insurance if you think you can find something better. I dont want to hear corrections officers and police force complaining about their retirement.
Read MoreThis is a democracy isnt it?
I also find it interesting that no one care about the local pharmacies and the employees that would be laid off if this deal went through.
Does the public care that this health care was obama care?
It is clear that state employees are being blamed and I am just cant understand their behavior. There seems to be no recognition that 725 million was just given back by state employees.Was their sacrifice from anyone else?
The public thinks it is okay to take more away from state employees and also give them Obama
Read Morejosephine, i know that i am one of the many repeat posters on here but i truly am upset that we are in the middle of a deficit and allocating money for projects. We dont need buses, railway cars to ship people out of state for work when we need to keep the jobs here.
However our deal failed. Because there were many unfilled holes in it. I am sure if we were all given more than 3 weeks to vote on it, we would have been able to see the good side of the
Read MoreSEBAC miscalculated many things.
(Don't blame the rank-and-file for that.)
--perturbed
Thank-you notsnoppystate
I went on the Hartford courant and saw post that were very disturbing. There are comments that said state employees are greedy selfish pigs.
The union leaders never went to press ever even today expressing how much we have given up and just gave up 725 million dollars. This is very telling. They stood there and blamed everyone except themselves.
They clearly had an agenda for many years with universal health care. I find it extremely upsetting that the public is saying this to state employees.We are there to do a job. and in no way did any
Read MoreI would not give this health care to anyone I know. I researched everything and what I found was very disturbing health care policy. In fact in their own paperwork the union leaders and Nancy Wyman wrote that their are not enough health care workers now never mind to sustain this obama care. There are not enough hospitals. This plan there is no cost savings but in the other plan that you will get through into because according to them over 50 percent fail and I wonder how much over 50.
When the first paperwork came out it was
Read MoreTake a look at this link, it's dothemathct.com. The NEW increased sales tax, $44.4 million is going to towns and cities on the list. It is the second to the last entry on the first page. It is dated May 3, 2011. Last year they got nothing, and check out the note on the bottom of the first page. Add up the numbers. Yeah, right, there's no money except from the state workers.
We were betrayed by our unions and Malloy. He set us up to take the fall if the deal didn't
The proposed healthcare changes are a joke, and the jokes on those who voted yes. The system you voted for will disappear like dust in the wind in a year or so if it ever gets approved. Right now, your healthcare plan is protected as a pre existing plan under the new Federal rules, and does not need to comply with Obamcare/Sustinet. The new plan they say has only a few changes, but those changes make a big difference. The changes, though minor, forfeit the protection of the pre existing plan and designate the plan as new. As a new
Read MoreI agree Nobody (11:30) you could not have said it better!
It was all about the Sustinet or what ever it is this week.
This fight will continue until they get this health care through.
Never was about saving 205 million dollars. Let me continue with my Health Care until 2017 as my union bargained in 1997 to 2017 in the Sebac V agreement. Malloy You never wanted furlough days back because it has always been about passing the Sustinet Health care and breaking the 1997 agreement.
It appears that Governor Malloy will go down in history being remembered as Governor "Malayoff."
The governor needs to stop being stubborn and holding his breath because he did get his own way.
To the citizens reading this, you need to be aware that state employees ARE willing to make hundreds of millions of dollars of concessions, which the state could really use right now. Governor "Malayoff" is basically telling us to stuff it because we refused to open standing agreements which would make him look like a big shot politician who could bend the unions to
Read MoreHOSED!!!
Bottom line, the State employees are being HOSED as are the residents and tax payers of CT. State employees are being used as pawns by King Malloy and our bend over union leadership. No one wants your OBAMACARE, stop forcing your progressive agenda on the State employees and residents of CT. How can you justify all of the future spending ( magic bus - the majority of the citizens of this state do not ride busses to begin with, and the expansion of Uconn medical along with the salary for the new school president with longevity). This whole thing
Maximus - you got it almost 100% correct. The part you missed is that the Union leaders want Sustinet just as badly, or more than the Gov. Their ideology trumps what is in the best interest of their members. We kept hearing all along that we were being misled and that the healthcare changes had nothing to do with Sustinet. How can you trust anyone that will so obviously lie right to your face. My emails to union leaders have all gone unresponded to. They could not explain to me why they were supporting
Read MoreI've said it before when I urged active state employees to vote yes on the SEBAC Agreement and I'll say it again - although I can think of a thousand perfectly valid reasons for voting No, in my opinion there is one overriding reason to have voted yes - in the longer term, lots more will be lost by voting no than the possibility of layoffs in the short term. These losses will come from the gradual weakening of collective bargaining rights probably starting during the "recall" of the legislators next week and extending through sessions in the next
Read MoreGee, you guys don't seem to like Malloy. Well, WHY THE HELL DID YOU VOTE FOR HIM? I didn't.
You hate Republicans and conservatives but you haven't had any major problem with Republicans (Don't count Weicker - He was kicked out of the Republican Party and started his own party.)
Malloy hasn't told the truth on anything. He seems to be a compulsive liar. Remember, "I will not raise taxes on the Middle Class?" Remember, " I am pro labor?" I would love to give that guy a polygraph on statewide TV.
Well, the good news
Read MoreBalancing the budget is a good thing. Republicans and Democrats should have been doing this all along.
A good program to balance the budget would be:
1. Cut spending - there is a lot of pork in this budget.
2.Do not raise taxes - in this economy a lot of families are getting by by the skin of their teeth - do not push them over the edge.
3. Bring Union salaries and benefits in line with those in the private sector. We cannot afford to have a pampered privileged class of workers living on the
Read MoreConnie you have by far posted the most sensible thing i have seen in all these many postings aon this topic. As a retired tier 1 employee I had no opportuity to vote on the health care changes that would affect me. I made several suggestions to the gov office and to my state reps but rec'd no response. You are absolutely correct that state employees will bear the brunt of citizen anger and will see the stress level increased. Non-state employees may forget that it is the job of state workers to find housing and
Read MoreGeorgiact, I was just ranting the obvious, I know the leaders have an agenda, it disgusts me. I knew from the begining where this was going, I have also emailed my union leaders and the emails have been return with lies, which was expected. Sad. Well, I guess we may see a large drop in union dues soon, I don't think that will go over well.
"If the state does not change its demographic trajectory, it faces a bleak future."
A Connecticut Center for Economic Analysis report, "Recovery Stirring, But Will Connecticut be Too Old to Compete?"
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