In what is essentially a gigantic refinancing, Gov. M. Jodi Rell announced a new budget-cutting plan Wednesday that involves less borrowing at a lower interest rate to save $337 million more than a Democratic plan.
The move would allow the state to reject all plans for “securitization,” a complex borrowing mechanism that has been opposed by both Republicans and Democrats. The highly unpopular idea would thus be dropped in an election year, and no lawmakers would be prompted into voting for securitization as the November election approaches.
The state had been planning to use various state revenues as collateral in order to borrow $1.3 billion for the 2011 fiscal year in the securitization plan, but Democratic legislators strongly rejected Rell’s idea of legalizing the Keno gambling game and using an expected $60 million in annual revenue to help pay off the bonds.
In addition, Rell is calling for turning the operation of the state-owned Bradley International Airport into a quasi-public agency that would generate an additional $25 million per year for state coffers. Bradley would essentially be run like a port authority – as in other states – and would have more flexibility in dealing with airlines and vendors than the state currently has, officials said.
In a complicated series of moves that need legislative approval, Rell is now calling for borrowing money at 3 percent, rather than 4 percent – which is 1 percentage point but a 25 percent rate difference. In addition, the borrowed money would be repaid in 7 years, rather than 10 years – thus saving the state money.
Like a complicated chess game, the plan involves a series of moves that are contingent upon each other. The proposal involves transferring more than $1 billion in the state’s “rainy day” fund from the 2010 fiscal year into the 2011 year, plus moves involving the competitive transition assessment on electric bills, the Energy Conservation and Load Management Fund, and the Renewable Energy Investment Fund. Upon hearing about the complex and multi-pronged deal, one longtime lobbyist asked if Wall Street investor Bernard Madoff was involved in the deal.
“I think it’s a sound plan,” Rell told reporters in her Capitol office. “If there are other suggestions, I welcome them.”
After meeting with Rell, the top legislative leaders had little comment on the complex plan, saying they needed to analyze the proposal to see if the numbers add up.
“I think it could help move things forward,” said Senate President Pro Tem Donald Williams of Brooklyn.
At the same time, Rell is also proposing to “sweep” environmental funds to help pay for shortfalls in the state’s general fund. The New Haven-based Connecticut Fund For the Environment criticized Rell for calling for sweeping 50 percent of the Connecticut Energy Efficiency Fund and the Connecticut Clean Energy Fund.
Charles Rothenberger, staff attorney for Connecticut Fund for the Environment, said in a statement, “This is unequivocally the wrong direction for the state. For months, the legislature and the clean energy business community have been working to improve Connecticut’s economic future. Supporting clean energy jobs, reducing energy costs, and freeing up money that can be spent in other areas of the economy are part of these efforts. The administration is eviscerating these efforts by reversing course.”
The energy funds, according to CFE, supports nearly 12,000 jobs, including those involved in fuel-cell manufacturing, solar installation, and fuel cell manufacturing, and energy auditing. The funds support programs that help consumers make energy-saving improvements to their homes and businesses.
The CFE stated, “Earlier this year, the governor put forth a proposal to securitize 37 percent of the customer ratepayer funds and in 2009, a similar plan to securitize the funds called for stripping $50 million from the funds each year for two years and moving $52 million from the funds to the general fund each year for the next decade to securitize a $350 million payment to the general fund. Met with strong opposition from business leaders, state policymakers, and environmental advocates, that plan was scrapped and the resulting investment in the clean energy and energy efficiency funds allowed the state to leverage state spending and take advantage of a $38.5 million federal stimulus investment.”
Christopher Phelps, the executive director of Environment Connecticut, said, “With her proposal, Governor Rell has turned her back on clean energy businesses such as solar installers and fuel cell entrepreneurs. It would slash weatherization and energy efficiency programs that help families and small businesses on Main Streets across the state cut their energy bills and put money back in their pockets. The result will hurt out economy and hamstring programs that are helping Connecticut cut its dependence on polluting energy sources that contribute to air and global warming pollution.”
Phelps added, “As the cliché goes, this is a penny-wise, pound foolish proposal. In fact, Governor Rell has dispensed with half of the cliché and chosen instead to simply be pound foolish.”