For those who want a snap-shot about how political power has corrupted Connecticut’s budget process – this is the post. It is a lengthy article but it provides readers with an extremely important understanding of the level of deceit surrounding Connecticut’s fiscal health.
The CT Mirror’s Keith Phaneuf is the state’s leading reporter when it comes to the Connecticut State Budget. His article in last night’s CT Mirror is entitled, “Malloy to order a 2nd round of emergency cuts as deficit swells.” Christine Stuart, of the CT Newsjunkie, also covers the latest news in a piece entitled, “Second Round of 2015 Budget Cuts On The Way.”
As Keith Phaneuf explains;
“Gov. Dannel P. Malloy will order his second round of emergency spending cuts in two months as the current fiscal year’s budget deficit reached a new high Tuesday, approaching $121 million.
Eroding tax receipts and other revenues – first outlined in a report last week – added $39 million to a deficit that stood at $32 million on Jan. 1.
But the governor’s budget agency, the Office of Policy and Management, also disclosed Tuesday in its monthly budget report to the comptroller that “deficiencies” — likely cost overruns in various agencies — have grown by another $50 million. And most overspending, by far, involves Medicaid.”
So, immediately after the election, the Malloy administration announced that a state budget deficit of approximately $100 million had suddenly appeared. In response to the news, Governor Malloy identified well in excess of $50 million in cuts to various programs.
Now, a month later, and despite those cuts, Connecticut’s budget deficit has jumped to over $120 million.
In order to fully understand the scheme that was instituted by Governor Malloy and his operation, you must carefully follow the bouncing ball…
Connecticut State Law (Section 4-85 of the Connecticut State Statutes) requires that if the State Budget Deficit exceeds one percent of the appropriated budget, the Governor MUST submit a deficit-mitigation plan to the Connecticut General Assembly. Any proposed cuts in excess of what the Governor is allowed to implement on his own (that is cuts in excess of three per cent of the total appropriation from any fund or more than five per cent of any individual line-item appropriation) requires the approval of the General Assembly.
In order to ensure that there is some degree of honest oversight, it is the State Comptroller and NOT the Governor or the Office of Policy and Management who has the legal duty to determine if a shortfall exists and whether it is in excess of one percent of the general fund appropriation.
To facilitate the Comptroller’s responsibilities, on the 20th of each month, the Secretary of the Office of Policy and Management (Ben Barnes) provides the State Comptroller (Kevin Lembo) with a letter summarizing all the issues related to state revenue and expenditures. The OPM Secretary has the legal obligation to accurately report whether state revenues are up or down from the previous month and whether any state agency is over-spending its budget allotment.
The Comptroller has his own budget experts and both OPM and the Comptroller are also supposed to look at the information provided by the non-partisan Office of Fiscal Analysis to guide their assessments.
Throughout the recent gubernatorial campaign, Governor Malloy constantly and consistently declared that there was no state deficit, nor would there be a state deficit this year (or next year).
Two weeks before Election Day, OPM Secretary Barnes issued his mandatory monthly letter (October 20, 2014) informing State Comptroller Lembo that revenues where on track and that no state agency was spending or would be spending more than their budget.
Although Lembo used his “Letter of the First” to warn about the problems that lay ahead, he certified on November 1, 2014 – five days before the Election – that there was no state budget deficit.
However, the notion that in a General Fund Budget of $17.5 billion, every single line-item was perfect and there would be no overspending in any area was beyond absurd. Traditionally state budget overspending is in the range of $100-$200 million or more.
But with Election Day approaching, Malloy and his operatives stuck by their claim that there was absolutely no state deficit.
However, on October 31, 2014 Keith Phaneuf reported, “Nonpartisan analysts tracking $84M in potential cost overruns in state budget.”
Phaneuf wrote, “Gov. Dannel P. Malloy’s administration isn’t projecting any troubles for the current state budget, but the legislature’s nonpartisan analysts have identified almost $84 million in potential problems. The Office of Fiscal Analysis reported “deficiencies” or potential cost-overruns in five areas. Nearly half of the deficiencies, about $40 million, are in the Department of Social Services. Another $27 million involve health care for state employees and retirees. Comptroller Kevin Lembo warned last May that a shortfall in this area was likely because of a projected surge in retirements among state prison guards.”
But with Election Day so close, and the election hanging in the balance, Malloy and his campaign utterly rejected the notion that the non-partisan Office of Fiscal Analysis was correct and they were wrong.
But day’s after Malloy won re-election, the Malloy administration began to divulge the truth.
Eight days after Election Day, Phaneuf reported, “Malloy to order emergency cuts, restrict hires to counter impending deficit” writing,
“To reverse an impending state budget deficit, Gov. Dannel P. Malloy’s administration has told agencies it will order emergency spending cuts and freeze all-but-critical hiring…In a memo sent late Wednesday to all agency heads, the governor’s budget director, Office of Policy and Management Secretary Benjamin Barnes also reinforced existing caps on overtime work.”
Nine days after Election Day, Phaneuf reported, “It’s official: CT’s budget is $89 million to $100 million in the red,”adding,
“The state budget received its first official deficit reports Friday when nonpartisan legislative analysts and Gov. Dannel P. Malloy’s administration projected shortfalls ranging from $89 million to just under $100 million.
“And while the administration issued the larger of the two deficit forecasts — $99.5 million — budget director Benjamin Barnes, insisted it quickly would be closed, and reasserted Malloy’s insistence that tax hikes are not an option.
“This is consistent with what the administration has been saying,” Barnes said, “that no matter what the projections are, we will manage and administer the budget so that there will be no deficit. It is important to remember that this is a prediction of what would happen now and in the future should we do nothing — and doing nothing is not an option.”
The whole situation revealed the grim political gamesmanship in which Malloy and his advisers were engaged.
Before Election Day – On October 20, 2014 – the Malloy administration’s official letter to Comptroller Lembo said there was no state deficit.
After the election – On November 20, 2014 – the Malloy administration’s official letter to Comptroller Lembo admitted that there was a $100 million state deficit.
And the deceit continued…
On December 20, 2014 OPM Secretary Barnes bragged that the $70 million in cuts instituted by the Malloy administration meant that the State deficit was down below $40 million. According to Keith Phaneuf’s report at the time, “Malloy’s budget chief, Benjamin Barnes, also warned in his last forecast on Dec. 20 that no major growth in state revenues was anticipated at this time. But Barnes also did not project any decline in the state tax revenues and, equally important, Barnes did not identify any additional areas of overspending.
And yet thirty days later – On January 20, 2014 – comes the “stunning” news that revenue has declined and “new” areas of overspending have suddenly been identified.
Now the Malloy’s administration suddenly admits the state deficit has jumped from less than $40 million to almost $121 million, despite the $70 million in cuts – because state revenue is actually down an additional $39 million and state agencies have spent $50 million more than authorized (mostly in the area of Medicaid).
Before the Election – no state deficit.
Within sixty days after the election – that overall problem has grown by nearly $200 million.
The fact is that every state agency has professional staff monitoring their budget on a daily basis.
The Office of Policy and Management has an entire office of professional staff monitoring the state budget.
It is beyond inconceivable that Governor Malloy and his team suddenly discovered the sudden decline in revenue and yet another significant and growing problem with overspending.
But instead of telling the truth, Governor Malloy, his administration and his campaign decided that their best strategy was to lie about the existence of the state deficit and the magnitude of that deficit.
Was their rationale due exclusively to the fact that they wanted to make it seem like Governor Malloy was a good fiscal administrator?
No, the real issue is more complex.
Recall that this blog post begins with the statement,
Connecticut State Law (Section 4-85 of the Connecticut State Statutes) requires that if the State Budget Deficit exceeds 1% of the appropriated budget, the Governor MUST submit a deficit-mitigation plan to the Connecticut General Assembly. Any proposed cuts in excess of what the Governor is allowed to implement on his own (that is cuts in excess of three per cent of the total appropriation from any fund or more than five per cent of any individual line-item appropriation) requires the approval of the General Assembly.
The fundamental problem facing Governor Malloy and his political spin operation was more than simply the truth that a state deficit existed.
The problem was that if they had told the truth – the whole truth – it would have been clear that the size of the budget deficit was greater than $170 million and that put it in excess of the one percent trigger that would have, in turn, required Malloy to develop a public Deficit Mitigation Plan laying out where all the cuts would be taken to eliminate the entire deficit.
While Malloy was proclaiming that if he was re-elected, there would be no tax increases, no cuts in vital programs and no need to approach the state employee unions about concessions, the last thing Malloy and his political team could afford was not only revealing that there was a deficit, but actually detailing where the cuts would take place.
The key constituencies that Malloy needed to win are those that are most likely to be alienated by the type of cuts Malloy was going to implement to balance the budget.
Keeping the fact that there was a state deficit secret was important to Malloy’s campaign strategy, but even more importantly, the Malloy campaign needed to make sure that under no circumstance did anyone discover that the projected deficit actually exceeded one percent of the general fund.
Had that been known, Malloy would have to have laid out an entire plan – a plan that would have been seen as devastating to the very people Malloy needed to win, so it was necessary to stay silent in order to trick them into casting their vote for him.
For that very reason, even when the news of the deficit started to be released (safely after the election), Malloy had to ensure that that it was revealed slowly… in phases… so that it never exceeded that $170 million trigger.
First came the news of a $100 million deficit, which he claimed he “knocked” down with a round of cuts.
Now comes the news of a larger deficit…which he says will bring along a second round of cuts
But holding the news until after the election, and then manipulating when the truth was revealed, Malloy not only made it through Election Day, but has managed to avoid having to produce the required Deficit Mitigation Plan altogether.
Next month Malloy will be announcing his proposed budget for Fiscal Years 2016-2017, but right now he is doing the “happy dance,” knowing that he successfully manipulated the law, and thus was able to trick the people of Connecticut … BOTH BEFORE AND AFTER ELECTION DAY.
And that is why these past two months are a case study about how political power has corrupted Connecticut’s budget process.