Connecticut state budget (2012-2013)

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Shortfall and subsequent cuts

As of Nov. 15, 2012, the state's Office of Policy and Management said that the FY2013 $20 billion state budget had a shortfall of $365 million.[1] That prompted the governor to call for $170 million in cuts on Nov. 28, 2012.[2] The cuts include $32 million from the Department of Social Services and $21 million from the Department of Developmental Services, and $18 million from the Department of Children and Families.[2] Gov. Malloy submitted the request to the General Assembly's Appropriations Committee. Legislative leaders had already agreed to $3 million in cuts, and the Judicial Branch agreed to cut $5.75 million.[2]

General information

The biennial budget totaled $40.54 billion, including a $20.14 billion component for FY2012 and $20.4 billion for FY2013.[3] It increased state spending from $19.3 billion in 2011 to $20.3 billion in 2013, approximately 4.5%.[4] A $3.7 billion tax hike, the largest in the state's history, was also included.[5] The FY2012 budget had been balanced, erasing an anticipated $3.44 billion deficit.[6] The budget was balanced, however, with the assumption of union concessions, which the union ultimately rejected. The legislature would reconvene for a special session on June 30, 2011, to balance the budget.[7]

As of October 2012, State Comptroller Kevin Lembo and the Malloy administration agreed that the projected deficit in the budget more than doubled to $60.1 million, meaning it doubled from September to October, due to lower tax receipts. If the estimated deficit topped $192.6 million, Gov. Malloy would have to propose a plan for bringing the budget back into balance.[8]

FY2013 Budget

On May 8, 2012, both the House and the Senate approved the same $20.5 billion budget for FY2013 that closed a projected $200 million deficit.[9][10] The House approved the budget by a vote of 95-49, and the Senate voted 22-13 in favor.[10] The budget was the result of a deal the Gov. Malloy negotiated with Democratic legislators.[10] Highlights of the legislative budget include:[9]

  • increases overall state education spending for municipalities by $100 million;
  • preventing bus fare hikes;
  • creation of a new state office to promote affordable housing;
  • funding cuts to agencies;
  • delayed implementation of generally accepted accounting principles.

In a special session, the legislature approved a jobs plan as part of an omnibus bill the passed on June 12, 2012. It expands the state's Small Business Express Program to provide loans and grants to an estimated 3,600 additional businesses.[11]

Deficit and Governor's Budget-Cutting Authority

The legislature's nonpartisan fiscal office announced on Jan. 25, 2012 that the state budget deficit had grown to a projected $144.5 million. Two months prior, the same office had projected a surplus of $100 million. The deficit stemmed from lower than anticipated tax revenues, despite recent tax hikes.[12] The governor said that he did not agree with the fiscal office's calculation because it failed to include the funds in the salary adjustment account.[13]

Gov. Dannel Malloy said on Jan. 24, 2012 that he planned to use his unilateral authority to make budget cuts of $78.7 million in order to keep the state in the black for the current fiscal year. Malloy was limited to reducing any line item by 5 percent.[14] The list of cuts the governor wanted to make include:

  • $17,500 from the Department of Veterans Affairs' account for headstones,
  • $2 million in personal services or staffing expenses at the Department of Developmental Services,
  • $5.7 million from the judicial branch, and
  • $800,000 from the legislative branch.[14]

Union concessions

The governor initially signed into law a two-year, $40.1 billion state budget with a $2 billion hole, $1 billion in each year of the budget which he intended to fill with concessions from the more than 46,000 unionized rank-and-file state employees.[15] When unions and the governor could not reach an agreement on how to fill that $2 billion gap, on May 10, 2011, Gov. Malloy issued layoff notices to what he called "the first 4,742 state employees."[16] Days after the governor issued the layoff notices, the unions agreed to agreed to $1.6 billion in concessions. Four unions rejected the bill,[17] The opposition focused on the deal's health care provisions, and also reflected the beliefs among some members that they could win a better package if they rejected this one, thinking that Malloy's layoff threats were not serious.[7]

Unions amended their bylaws so that membership could ratify the concession deal with a simple majority vote in favor of doing so.[18] Fifty-seven percent of union members approved the deal on the first vote, but at the time the bylaws required 80 percent approval.[19] After the union rejected the deal, the governor recommended laying off nearly 5,500 state employee, eliminating 1,000 vacant positions and cutting municipal aid by $54 million cut to help offset the unrealized savings from the failed union concession deal.[20] The unions voted to approve the deal on their second vote. Fourteen of 15 unions approved the deal. The governor said that the plan's lower health care and retirement costs for state workers saves taxpayers $21.5 billion over the next 20 years. After the results were announced, the State Employees Bargaining Agent Coalition wrote to the governor and requested that he rescind the layoff notices.[21]

Budget Provisions

The Senate passed a final package of budget adjustments that plugged a $400 million hole in part by approval to a $1.6 billion union concession deal on June 7, 2011. The budget closed a projected deficit up to $3.67 billion with $1.52 billion in new state taxes and fees, $800 million in revenue growth, and spending that totals $1.36 billion less than the level originally projected to maintain current services.[3]

The biennial state budget increased taxes approximately $3 billion for the next two years combined, the highest tax hikes in the state history. Increased taxes included:[22]

  • The sales tax would increase from 6 percent to 6.35 percent on retail items.[23]
  • The luxury tax would rise to 7 percent on cars worth more than $50,000, yachts selling for more than $100,000, jewelry for more than $5,000, and clothing items and wedding gowns selling for more than $1,000.[23]
  • Instituting the Amazon tax on online sales.[23]
  • The cigarette tax from $3.00 per pack to $3.40 per pack.[22]

An income tax increase meant residents would pay between 3 percent to 6.7 percent. It went in to effect on Aug. 1, 2011, and was retroactive to income earned since Jan. 1, 2011.[24]

Some budget cuts that were part of the approved concessions included:[25]

  • $5.8 million by closing the Bergin Correctional Institution
  • $280,000 by lessoning the cleaning frequency at state buildings
  • $410,000 by reducing the operating hours at some state buildings
  • $517,000 by shrinking computer contracts in state government
  • $260,000 by converting boilers to low-density systems
  • $108,000 by deferring the installation of a security alarm at the state police training academy

A budget deal between the governor and legislature was reached on April 20, 2011. The revised plan did not include some of the governor's planned tax increases, including some affecting the boating and car industries, but did include $2 billion in labor savings that had not yet been agreed upon.[26] Under the deal, the governor held the line on legislators' attempts to increase the top income tax rate beyond his proposed 6.7 percent, an increase over the prior year's 6.5%, but did agree to more people paying the top tax rate. In turn, lawmakers agreed to the governor's plan to win $1 billion in concessions from state employees in each of the next two fiscal years.

A lawsuit filed on May 7, 2011, in Hartford Superior Court asked to had the 2011-13 state budget signed by the governor declared "null and void" because it violates the 1992 law requiring a balanced budget and asks that the budget be returned to the legislature for further work.[27]

Budget Negotiations

Legislative Proposed Budget

After Democrats reached a deal with Gov. Malloy, the Senate passed the $40.1 biennial state budget on May 3, 2011, with a vote of a 19-17 vote. Later that day, the House approved the plan with an 83-67 vote.[28] making it the earliest budget in recent state history.[23] A key portion of the approved budget, however, had yet to be specified: the $2 billion in labor savings assumed in the tax-and-spending plan had not yet been reached with state employee unions.[28] The bill also creates $1 billion in surplus over the next two fiscal years, which the governor said can be used to replenish the state's Rainy Day Fund and to pay off debts.[28]

The Senate agreed to not increase gas taxes, although Gov. Malloy had initially proposed a three cent per gallon increase in mid-February. Gas prices rose $0.32 in April 2011. The final budget package still raises most of the state's taxes. The sales tax would increase from 6 percent to 6.35 percent on retail items, the luxury tax would rise to 7 percent on cars worth more than $50,000, yachts selling for more than $100,000, jewelry for more than $5,000, and clothing items and wedding gowns selling for more than $1,000. The final budget also includes the Amazon tax on online sales.[23] Overall, the budget raises taxes by $1.4 billion in the first year and $1.2 billion in the second year.[28]

The Republican alternative budget presented April 18, 2011, differed from the governor's in that it did not raise taxes. The budget mirrored the governor's plan to squeeze $1 billion in concessions from labor, and it also preserves state aid to cities and towns, as the governor's budget does.[29]


Governor's Proposed Budget

On April 4, 2011, Gov. Malloy requested that all agency heads trim their budgets by an additional 10% should the ongoing talks with the unions fail.[30]

On Feb. 16, 2011, Gov. Malloy presented his proposed two-year, $40 billion budget proposal. His $19.7 billion budget plan for FY2012 was one part of the plan. It was approximately the same amount as the prior year's budget and in it he asked public employees and taxpayers to share in the pain of closing a $3.2 billion deficit.[31] The FY2012 budget includes an array of tax increases as well as concessions from state employees. Malloy proposed a combined solution of $1.5 billion in tax increases and $1.8 billion in spending cuts, including $1 billion in labor savings.[32] For just FY2012, the governor aims for $800 million in spending cuts, $1.5 billion in tax hikes and $1 billion in union concessions.[29]

Malloy's proposed tax increase included boosting the sales tax rate to 6.3 percent. His proposal would raise taxes by $1.5 billion in FY2012.[33]

Malloy was proposing the streamlining of state government by reducing the number of government agencies from 81 to 57. He also cut his own administrative staff by 15 percent.

Malloy pledged $15 million to market and promote the state's multibillion-dollar tourism industry. That was an increase from $1 million in previous budgets.

Highlights of Malloy's proposed budget included:[34]

  • Created eight tax brackets for personal income tax.
  • Funded smoking cessation programs for Medicaid recipients.
  • Reduced dental benefits for Medicaid recipients
  • Strengthened Medicaid fraud recovery efforts
  • Increased Medicaid reimbursement rate to nursing homes
  • Proposed development of 150 new units of supportive housing to help families at risk of homelessness
  • Funded school reforms, requires teacher evaluations to be partly based on student achievement by 2013
  • $2 million in each year of the biennium for child daycare and school readiness programs
  • 17-year-olds would be considered juveniles as of July 1, 2012
  • $14 million for pay-as-you-go transportation projects

In FY2013, however, Malloy would have to close a $3 billion deficit, when he was only proposing to increase state spending by $500 million to $18.4 billion.[31]

The governor said he planned to maintain $2.8 billion in state aid to municipalities, depending on concessions made by labor during talks with the administration. About two-thirds of state aid to municipalities came through the Education Cost Sharing program, which the governor promised to fund at the same level as this year.[35]

State Employees

The governor's proposed budget relied on acceptance by state workers of $2 billion in cost savings over two years, which would come as a result of freezing wages and longevity payments, raising the retirement age and medical co-pays, and switching their health plan.[31]

Education

Gov. Malloy's proposed budget did not reduce state aid to education for FY2012.[31]

School districts rely on state grants for about 40 percent of their funding. Before the governor released his budget, Connecticut educators had expressed concerned about school funding in the FY2012 state budget.[36] One of the things we were very concerned about was what was going to happen when the federal stimulus aid goes away," said Bob Rader, executive director of the Connecticut Association of Boards of Education.[36] Without another stimulus or a strong economic turnaround, "The state of Connecticut would be facing a $269.5 million gap just to level-fund the ECS grants," said Tom Murphy, state Department of Education spokesman.[36]

For FY2012, Connecticut devoted 31.1% of its total spending to education,down from 34.7% in the prior year.[37]

Fiscal Year Total Spending[38] Education Spending[39] Percent Education Spending
2009 $37.4 billion $11.6 billion 31.0%
2010 $38.5 billion $11.4 billion 29.6%
2011 $38.5 billion $11.6 billion 34.7%
2012 $39.2 billion $12.2 billion 31.1%

Higher Education

A report by the Office of Legislative Research found that the growth in higher education budgets had far outstripped the level of state General Fund support for the institutions.[40] While combined spending by the state's three higher education systems grew by nearly 230% over two decades, to $1.94 billion in FY2009, the General Fund contribution increased by less than 83%, to $556 million.[40][6] "Public universities were definitely on the firing line," said Higher Education Commissioner Michael Meotti. "The next several years were going to be the toughest budget years higher education had faced in the last 50 or 60 years."[6]

References

  1. Cite error: Invalid <ref> tag; no text was provided for refs named enormously
  2. 2.0 2.1 2.2 The Connecticut Post "Gov. Malloy to cut $170 million from budget" Nov. 28, 2012
  3. 3.0 3.1 The Connecticut Mirror "After 8½-hour debate, Senate closes the book on the next budget " June 7, 2011
  4. Office of Fiscal Analysis Fiscal Note
  5. The News Times "Government's disconnect with reality" May 16, 2011
  6. 6.0 6.1 6.2 The Connecticut Mirror "State colleges and universities bracing for budget storm" Dec. 29, 2010
  7. Cite error: Invalid <ref> tag; no text was provided for refs named upended
  8. The Waterbury Republican-American "Comptroller releases new deficit calculations" Nov. 2, 2012
  9. 9.0 9.1 The Hartford Courant "$20.5 Billion Budget Clears Senate, Now Headed For Malloy's Signature" May 8, 2012
  10. 10.0 10.1 10.2 CBSNews.com "Conn. House approves $20.5 billion budget" May 8, 2012
  11. The Connecticut Mirror "Special session on budget explodes into dozens of topics" June 12, 2012
  12. The Hartford Courant "State Budget Deficit Grows To $144.5 Million" Jan. 25, 2012
  13. Jan. 26, 2012
  14. 14.0 14.1 The Hartford Courant "Malloy to make cuts to cover $73.6 million deficit" Jan. 24, 2012
  15. Forbes "Any Conn. labor deal needs rank-and-file support" May 9, 2011
  16. The Wall Street Journal "Hardball in Connecticut " May 11, 2011
  17. The Connecticut Post "Union leaders meeting this morning as Malloy prepares for jobs tour" June 27, 2011
  18. The New York Times "In Connecticut, Unions Amend Voting Rules to Revive Deal" July 18, 2011
  19. The Connecticut Post "With layoffs, shutdowns planned, union leaders to meet today" July 18, 2011
  20. The Connecticut Mirror "Malloy recommends nearly 5,500 layoffs, $54M cut in town aid" June 29, 2011
  21. Fox News "Conn. unions approve deal to close budget gap" Aug. 18, 2011
  22. 22.0 22.1 Connecticutplus.com "Budget signed, some plan to challenge it in court, more join 2012 races" May 9, 2011
  23. 23.0 23.1 23.2 23.3 23.4 The Hartford Courant "Gas Tax Increase Dropped: Budget Approval Expected By Tuesday" May 2, 2011
  24. Businessweek "Gov: Conn. tax hike retroactive due to calendar" Aug. 1, 2011
  25. The Hartford Courant "Malloy Administration Cuts $135 Million In State Budget Tuesday; Many Cuts Avoided By Employee Concessions" Sept. 6, 2011
  26. The New York Times "Hartford Budget Deal Rolls Back Tax Plans" April 20, 2011
  27. Greenwichtime.com "Ruling on lawsuit seeking block of state budget could come today" May 8, 2011
  28. 28.0 28.1 28.2 28.3 Forbes "Democratic budget plan passes Conn. House" May 4, 2011
  29. 29.0 29.1 The Hartford Courant "Democrats Agree On State Budget" April 20, 2011
  30. The Hartford Courant "Malloy's Contingency Plans Call For Cutting 10% More From Agency Budgets " April 4, 2011
  31. 31.0 31.1 31.2 31.3 Reuters "Connecticut governor unveils $17.9 billion budget, same size" Feb. 16, 2011
  32. Connecticut Mirror, Taking Measure of the New Governor, Feb. 25, 2011
  33. Businessweek "Connecticut budget committees face deadline to act" April 18, 2011
  34. Associated Press, Highlights of Malloy's State Plan, Feb. 17, 22011
  35. The Connecticut Mirror "Municipal aid was at stake in Malloy's talks with labor" April 1, 2011
  36. 36.0 36.1 36.2 The Hartford Courant "Jobs Bill Eases But Doesn't Erase School Budget Worries" Aug. 13, 2010
  37. State Budget Solutions "Throwing Money At Education Isn't Working" Sept. 12, 2012
  38. USGovernmentSpending.com "Connecticut Government Spending Chart - Total Spending" Aug. 4, 2012
  39. http://www.usgovernmentspending.com/spending_chart_1997_2017ALb_13s1li111mcn_20t USGovernmentSpending.com "Connecticut Government Spending Chart - Education Spending"Aug. 4, 2012
  40. 40.0 40.1 OLR Backgrounder: Higher Education Spending in Connecticut Dec. 8, 2010