Through a combination of accounting moves and fund transfers, Gov. M. Jodi Rell is seeking to close the state’s projected $504 million deficit in the current fiscal year.
The biggest single move would be spending $219 million from the $1.4 billion rainy day fund for fiscal emergencies. The money is currently earmarked to close next year’s budget, but the state’s dire fiscal situation is prompting Rell to propose using it in this year’s budget. As such, it would create a hole for next year that would need to be filled – and Rell proposed various changes Monday to do that.
The rainy day fund had been allocated in three different years to fill budget holes in each year. Overall, $342 million had been set aside for the 2011 fiscal year from the fund, and $219 million of that total would be moved to the current fiscal year. That move can be made, budget officials said, because the money can be covered in the 2011 fiscal year from funds that have been earmarked.
Rell’s plan also calls for about $82 million in budget cuts, $58 million in various fund transfers, and about $45 million in federal stimulus money, according to the plan that was released late Monday afternoon.
“This deficit must be eliminated now through swift and decisive action. We cannot afford to wait and hope or to count on future revenues that no one is certain we will collect,” Rell said in a statement. “The plan I am proposing not only eliminates the current deficit but makes much-needed structural reforms that will improve our prospects for long-term recovery. If we do not act now, any short-term cuts we manage to make will be overwhelmed by the inexorable growth of state spending.”
She added, “These choices may not be easy, but they are necessary. These choices may not be pleasant, but they are crucial. These choices may not be politically popular, but they are the right choices to make.”
Rell’s plan is subject to approval by the Democrat-controlled legislature, which has rejected most of Rell’s proposed budget cuts over the past year. The bitter standoff led to the longest budget stalemate in state history – stretching even longer than the epic battles in 1991 when then-Governor Lowell P. Weicker, Jr. created the state income tax. The budget was eventually approved by both chambers, but Rell allowed it to become law in September without her signature. The state was already into the third month of the current fiscal year before the budget became law.
Democrats say that the budget deficit would be smaller today if Rell had not vetoed two bills that they had passed before Christmas in an attempt to close the gap. One of those bills involved delaying changes to the estate tax, which is paid by the state’s richest families. Based on the changes this year, anyone who dies with less than $3.5 million is not subject to the estate tax. That number is an increase from the previous threshhold of $2 million, and House Speaker Christopher Donovan said in an interview that the estate tax must be on the table again this year.
Rell rejected the bills late last year, and Democrats could not generate enough votes to override the vetoes.
The estate tax represents a tax cut of more than $70 million for the full year because the law not only increases the threshold, but it also cuts the rates for all estates. Many Democrats did not want to cut the rates at all, but the changes were made in a compromise with Rell as the budget was being crafted – even though Rell never signed the document.
Many of the proposed changes in the Department of Social Services budget are cuts or Medicaid savings that had been previously mentioned in Rell’s prior budgets.
The Courant’s Arielle Levin Becker reports that Rell is also calling for suspending non-emergency dental services for adults under Medicaid and SAGA, which saves $1.8 million in FY 10 and $22.4 million in FY 11. This was proposed last year, and legislators rejected it after advocates fought hard against the cut.
“These are not easy cuts to make. They’re not popular,” said a Rell supporter. “Our legislature has picked the easy fruit.”
The University of Connecticut Health Center in Farmington is expected to cover $4 million to fund the inmate medical system.
“The review of the budget mitigation plan will begin immediately,” said Senate President Pro Tem Donald Williams, the highest-ranking senator. “One thing remains clear: real spending cuts will be necessary to help balance the budget. It is also critical that we take action to grow and protect jobs – something that has a direct impact on tax revenues and the deficit. I look forward to working with my colleagues in the General Assembly and the governor on both of these important issues.”
Greenwich cable television entrepreneur Ned Lamont, who is running for the Democratic nomination for governor, decried Rell’s plan.
“There’s nothing ‘swift’ or ‘decisive’ about kicking the can down the road,” Lamont said. “Connecticut’s budget needs more than a few band-aids. We face multibillion deficits as far as the eye can see, we have nearly maxed out the state’s credit card, and now Governor Rell wants to raid the remainder of our rainy day fund even faster, draining $219 million that will put us even deeper in the hole.
“Rell refuses to make the tough choices our state needs,” he said. “As governor, those are the first challenges I’ll tackle. I have already initiated a line-by-line, top-to-bottom review of the state budget so that on day one, I can begin squeezing out every last efficiency. Our next governor must call on everyone to make tough sacrifices and enact sweeping reforms that transform the way our government does business, restore our fiscal house to order, and ensure our children do not suffer an even worse crisis down the road.”