School Bus Seat Belt Fund: A prime example of Connecticut’s budget gimmickry

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According to Governor Malloy and his administration, the State of Connecticut is on target to end this Fiscal Year (FY14) with a $506.1 million surplus.

Malloy administration officials are so excited about the notion of a budget surplus that they are talking about proposing a targeted election year tax cut to win over middle-class voters even though the state faces a projected $3.2 billion combined deficit over the three fiscal years following this year’s election.

Governor Malloy would have the public believe that this year’s developing surplus is a result of his good management of Connecticut’s state budget.

However, the way Governor Malloy and the Connecticut General Assembly played with State Account 35416 is a prime example of the type of budget gimmicks that were used to help create this year’s projected “surplus.”

Here is how it played out:

Just a month after the 2012 general election, the Governor called the outgoing members of the Connecticut General Assembly into a special session to address a projected budget deficit in the Fiscal Year 2013 State Budget.

With the passage of “AN ACT CONCERNING DEFICIT MITIGATION FOR THE FISCAL YEAR ENDING JUNE 30, 2013,” the General Assembly passed Malloy’s Deficit Reduction Plan.  The bill passed the State Senate 31-3 and passed the State House of Representatives 140-3.  Democrats and Republicans joined together to overwhelming pass the bill.

As part of Malloy’s lengthy bill was the following language;

“Notwithstanding the provisions of section 14-50b of the general statutes, the sum of $ 4,700,000 shall be transferred from the school bus seat belt account established in said section 14-50b and credited to the resources of the General Fund for the fiscal year ending June 30, 2013.”

The money shifted $4.7 million from the School Bus Seat Belt Account to the General Fund.  (More on this fund in a moment).

As result of the deficit mitigation bill and some improved revenue, Fiscal Year 13 didn’t end with a deficit, it ended with a $398.79 million surplus.  Of that amount nearly $200 million was “re-defined” as “future revenue” and shows up in this year’s budget…helping to ensure a budget surplus.

Even though Fiscal Year 2013 ended with a surplus, the $4.7 million was never returned to the School Bus Seat Belt Account (#35416).  As of now, that fund has only about $1 million in it.

So what is the School Bus Seat Belt Account (#35416)?

Long time Wait, What? readers may remember a post when Malloy’s deficit mitigation bill passed in December 2012.  It was entitled, “Remember when school bus seatbelts were a big priority?

The December 20, 2012 Wait, What? post read something like this:

Remember when school bus seatbelts were a big priority?

Aka:  No that was then, this is now…

Following the January 2010 tragic school bus accident on Route 84 in Hartford that killed a Rocky Hill student who was attending one of the CREC magnet schools, the legislature kicked into action.

On May 1 of that year the General Assembly passed what was to become Public Act 10-83.

The law created the Connecticut School Bus Seat Belt account, “a separate non-lapsing account in the General Fund” and required that the funds be used to help school districts pay for the cost of equipping school buses with lap/shoulder (3-point) seat belts.

To pay for the program, the Legislature increased the cost associated with restoring a suspended driver’s license from $125 to $ 175.  The Office of Fiscal Analysis estimated the higher fee would raise about $2.1 million a year.

Fast forward two and a half years…and the fund now contains $4.7 million.

Yesterday, as part of the deficit mitigation bill, the Governor and General Assembly passed language overriding the previous law and transferring the $4,700,000 from the School Bus Seat Belt account into the General Fund…

Gone is the money for school seat belts.

That tragedy was yesterday’s news.

And besides, who would remember that the account in question grew out of the concern that elected officials had for the safety of our children.

The tale of how the government raided the fund that was supposed to be used to install seat belts on school buses is a sad and shocking reminder that while it may be true that state of Connecticut presently “enjoys” a surplus, things are not always what they seem.

Connecticut Fiscal Policy: Surplus First, Deficit Later

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According to Governor Malloy, Connecticut’s fiscal house is in order and thanks to “surging” revenue the state of Connecticut will have a significant budget surplus this year and a balanced state budget going into the 2014 gubernatorial campaign.  The Malloy administration is so excited about the news that it rumored to be contemplating an election year tax cut to try to bolster the Governor’s poor rating in the polls.

At the same time, Connecticut will be facing a combined deficit of approximately $3.2 billion in the three fiscal years following the November 2014 election.

So what is the real story about Connecticut’s fiscal health?

For those interested in the details, three recent articles provide a good explanation.

Read Keith Phaneuf’s CT Mirror article entitled “Will Malloy spend Connecticut’s shaky surplus on election-year tax cut?,” CPA Marcia Marien’s commentary piece in the Hartford Courant entitled, “State Is Broke — ‘Surplus’ Is Pocket Change” and the Wait,What? post from earlier in the month entitled, “Governor Malloy’s fake Connecticut Budget “Surplus”.

Together they paint a relatively clear picture of what is happening.

Thanks to years of irresponsible budget gimmicks, Governor Malloy inherited a budget deficit of about $3.7 billion.

That gap was filled with a $1.5 billion tax increase, a state employee concession package, some budget cuts and an impressive amount of borrowing and the use of one-time revenues including draining a number of special funds that were meant to address specific budget expenditures.

Over the past three years, leaving state positions unfilled, additional budget cuts – especially to Connecticut’s public college and universities, more raids to pull in one-time revenues, excessive borrowing for operating expenditures and some tax increases (i.e. the largest gas tax increase in state history) have allowed Governor Malloy to reach a point where the state does have a “surplus” and yet truly faces three years of budget deficits that will average over $1 billion a year.

What brought Connecticut to this precarious point is primarily the use of one-time revenues and the borrowing to pay for operating costs.

As Keith Phaneuf explains:

“Since the governor took office three years ago, close to $1 billion in operating costs have either been deferred or shifted onto the state’s credit card. Malloy criticized these very gimmicks when he was a candidate in 2010.

‘Too often over the past 16 years, and especially over the past two years, Hartford’s played a budget shell game; piles of money get moved around, erasers get used, and voila, there’s a ‘balanced budget,’ Malloy wrote in a 2010 campaign policy paper. ‘It fools only those who want to be fooled.’

Among the steps taken by Malloy and the legislature’s Democratic majority were:

  • Canceling an early $222 million debt payment in June 2012. Instead they used $138 million to close a year-end operating deficit and put $94 million into the Rainy Day Fund.

  • Refinancing debt to push $392 million in payments owed now until after the election.

  • Bonding $173 million in new municipal aid over this fiscal year and next.

  • Bonding $57 million for pollution abatement and stem cell research grants that previously were paid for out of the operating budget.

  • Borrowing an extra $39 million so that debt payments tied to converting state finances to Generally Accepted Accounting Principles could be deferred until after the election.”

You can read more about how gimmicks have been used to create the surplus in the Wait, What post – Governor Malloy’s fake Connecticut Budget “Surplus”

In the meantime, the answer is yes – Connecticut presently has a surplus but whoever wins the governor’s race in November 2014 will be facing the challenges associated with enormous budget deficits.

Kicking the can down the road….Governor Malloy style

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As the end of 2013 approaches we are reminded that unlike Gepetto’s wooden puppet, many politicians have taken lying and misrepresenting the truth to unprecedented levels, without suffering the ignominious consequences that affected Pinocchio.

If that wasn’t the case, Connecticut’s Governor Dannel Malloy would be having an extremely hard time getting in and out of the Capital this holiday season.

The 2010 Gubernatorial candidate “Dan” Malloy campaigned on a platform that unlike Gov. M. Jodi Rell, he would never “kick the can down the road.”

The definition of the idiom being, of course, that “If you kick the can down the road, you delay a decision in hopes that the problem or issue will go away or somebody else will make the decision later.”

Upon taking office Malloy’s initial budget speech to Connecticut legislators included the phrase, “This is our time to do what we were elected to do, to fix what’s broken once and for all.”

Malloy added, “We will borrow not one penny for operating expenses…Too much borrowing over the years for ongoing expenses is one of the reasons we’re in the bad shape we’re in.”

His $1.5 billion dollar tax plan was sold as part of his system of “shared sacrifice;” tax increases, program cuts and state employee concessions all publicized as the best mechanism to set fix the state’s finances.

Malloy’s style is to remind people that he inherited — not created — the largest budget deficit in state history.  Then, in nearly every speech Malloy has given, he works to convince voters that Connecticut’s finances are stable once again.   That done he then spends the rest of the speech bragging about the success of his effort.

This year, as Governor Dannel P. Malloy provided the closing remarks to the Connecticut General Assembly on June 6, 2013, he said – before uttering the words – “May God bless you, may God bless the great State of Connecticut, and may God bless the United States of America, that “This [year’s] budget refuses to kick the can down the road…”

In order to make his point Malloy skipped over the use of one-time revenues, the largest gas tax in state history, maintaining certain taxes that were supposed to come to end, barrowing record amounts of money to fund on-going operating services and continuing to shift the burden to anyone he could, such as local property tax payers and students attending Connecticut’s public colleges and universities..

He also conveniently failed to explain that while the state budget is “balanced” through the 2014 gubernatorial election, Connecticut’s non-partisan Office of Fiscal Analysis projects that Malloy’s irresponsible kicking the can down the road budget will leave the state with a budget deficit of $1.1 billion in Fiscal Year 2016, $1.2 billion in Fiscal Year 2017 and an incredible $1.4 billion deficit in Fiscal Year 2018.

Using what can only be described as truly unparalleled fiscal gimmicks, Governor Malloy has not only gone back on his campaign promises about being fiscally responsible – time and time again – but he has set up a scenario in which the State of Connecticut and its taxpayers will be facing a budget crisis of over about $3.7 billion over the next four fiscal years – a fiscal disaster that rivals the historic deficit that Malloy inherited in the first place.

While it is still the holiday season and the more in-depth debate about the 2014 gubernatorial campaign won’t really begin until after the New Year, the Pinocchio analogy seems particularly appropriate as we brace ourselves for the coming political year.

And on Education Funding… Malloy misleads audience… again…

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According to an article published in the CT Mirror and entitled,Malloy makes no promises to increase school funding further,” when speaking to the right-wing American Enterprise Institute yesterday, Governor Malloy wasnoncommittal Monday when asked during a forum in Washington, D.C., if he would further increase education funding again next year.”

In what has now become typical fashion, Malloy failed to tell the audience the whole truth.

In fact, what little funding Governor Malloy has provided for Connecticut public schools over the past three years has come with such extensive strings that it failed to provide local towns with real or meaningful options.

Even more importantly, Malloy’s new unfunded state mandates for far more standardized testing and the warped teacher evaluation program will cost Connecticut communities tens of millions of dollars.  Since the state is not reimbursing towns for most of these new costs, Malloy’s proposals will actually force most Connecticut towns to increase local property taxes and reduce existing education programs as they divert scarce resources to pay for Malloy’s untested and inappropriate programs.

But like so many other things associated with the Malloy tenure, the Malloy administration has refused to provide the public with honest information about its proposals.

As Connecticut taxpayers may recall, Malloy’ mantra of “shared sacrifice” was associated with a $1.5 billion tax proposal that included higher income tax rates for everyone EXCEPT those making more than $1 million.  However, Malloy’s successful effort to coddle the super-rich was never openly discussed by policymakers.

And yesterday, following the standard script, when he was asked about additional school funding Malloy responded with, “I think that it’s a little early to tell.”

What Governor Malloy failed to do was provide Connecticut voters with an honest assessment of the fiscal disaster that his administration has already created and will become increasingly apparent… especially after the next gubernatorial election.

According to the non-partisan Connecticut Office of Fiscal Analysis, Malloy’s tax and spending programs have created a situation in which Connecticut will face:

  • A $1.1 billion budget deficit in the fiscal year that ends on June 30, 2015,
  • A $1.2 billion budget deficit in the fiscal year that ends on June 30, 2016,
  • And a $1.4 billion budget deficit in the fiscal year that ends on June 30, 2017.

Equally appalling is the fact that even this year’s state budget is balanced by using one-time revenues and budget gimmicks that Malloy promised he would not utilize when he was running for governor.

By refusing to lay out the true nature of Connecticut’s financial problems, Connecticut citizens won’t have the information necessary to engage in an honest and thoughtful discussion about the challenges and issues facing the state.

Yesterday’s speech reminds us that the Malloy administration’s consistent lack of honesty and transparency will prove to be its most notable legacy.

You can read the CT Mirror story here: http://www.ctmirror.org/political-mirror/2013/12/02/malloy-makes-no-promises-increase-school-funding-further

Connecticut’s Governor and elected officials play: “It’s Alright, Ma (I’m Only Bleeding)”

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During the last gubernatorial campaign, each side claimed that they had a deeper commitment to fiscal responsibility and government transparency. 

Now more than two and a half years later we are further away from both concepts than most people could have possibly conceived of.

In an announcement that will come as no surprise to Wait, What? readers, a report by the Fiscal Policy Center, which is part of Connecticut Voices for Children has determined that we should consider changing our state song from Yankee Doodle Dandy to Bob Dylan’s famous ballad, “It’s Alright, Ma (I’m Only Bleeding).”

The non-partisan Fiscal Policy Center concludes;

“By relying on borrowing and one-time fixes, we’re undermining the long-term stability of the budget and gambling with these investments in our children’s future.”

The reported on the state budget that was proposed by Governor Malloy and approved by the Connecticut General Assembly “warns that the ‘quick-fix’ budget solutions adopted in the budget will deepen the state’s long-term budget deficit and could ultimately endanger funding for child and family services.”

The report goes on to explain that the new budget uses borrowing, one-time revenues, and fund transfers to close budget deficits and cover operating expenses and reports that, “ By relying on these measures, rather than recurring revenues to close the state’s budget gap…state policymakers have opened up a larger revenue hole in future budget years.”

Key problems about Connecticut’s state budget that highlighted in the new report include:

  • The new state budget “relies on almost $600 million in borrowing, over $400 million in temporary fund transfers, and $500 million in one-time revenues to pay for operating expenses.  Because these funding sources will dry up at the end of the two-year budget, there is currently a projected state deficit of $712 million in Fiscal Year 2016 and comparable holes in 2017 to 2018.” 
  • “Reliance on debt and one-time revenues will further increase budget risks for the state if economic growth does not return quickly.  The state’s budget projections assume that robust economic growth will result in increased state tax revenues.  With a nearly empty Rainy Day reserve fund, if this growth does not emerge, Connecticut would have little choice but to turn immediately to deep cuts, steep tax increases, and more borrowing.” 
  • “The state government has transformed over $1 billion in debt it owed itself and its employees into debt it now owes to bondholders, resulting in less flexibility and control of the repayment of that debt.  While the state budget plan pays down funds owed to the state employee and teacher pension systems, it does so by borrowing money from private bondholders.  In addition, the state has borrowed money from the private market to meet stricter accounting requirements under the rules of Generally Accepted Accounting Principles (GAAP).”

You can find the full report, entitled “A Gambler’s Budget: the Fiscal Year 2014-15 State Budget,” at www.ctvoices.org.

Hold on…Now let me see if I understand what you are saying….

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Pick up any newspaper and you are bound to see at least one story about the impact of budget cuts and another about how state governments are giving money away to private companies in an attempt to convince them to create or retain jobs.

It is quite a commentary about our times.  A lack of adequate funding means people who work for schools, hospitals and nonprofit providers of human services are or will be losing their jobs, while taxpayer continue to provide the money that is being used to try and persuade businesses to pledge that they will create or keep private sector jobs.

True, it may not be the notoriety that we want, but you certainly can’t say that Connecticut hasn’t become the epitome of this paradox.

For example, earlier this week, Wait What? readers were provided an opportunity to read two posts, one entitled Has it come to this…? and another entitled And while cutting essential services, Malloy gives $100,000 to a Stamford Brewery.

The first post reported on a recent Hartford Courant commentary piece by a father lamenting Governor Malloy’s cut to essential programs that help Connecticut’s developmentally disabled residents while the second was about the Governor’s visit to a brew pub in Stamford to celebrate a $100,000 taxpayer-funded grant that the Malloy Administration was giving to help the brew pub expand.

The two stories served to enlighten readers about the reality of our times or the juxtaposition between an era where we are cutting vital services while providing private companies with what some would call economic development incentives and what others would refer to as corporate welfare.

What I failed to report was that, in addition to the brew pub, Governor Malloy and his Commissioner of the Department of Economic and Community Development (DECD), Catherine Smith, were actually visiting three other companies around the state that day.  All four of the companies were receiving funds thanks to the State’s Small Business Express Program (EXP).

Over the past eighteen months, the Small Business Express Program has given out more than $80 million.  According to state officials, the program has helped “create and retain more than 7,600 jobs.” The Legislature will soon be voting to give the Governor an additional $60 million for this program.

In addition to Stamford’s Half Full Brewery, Malloy was visiting Atlantic Canvas and Awning (a company that received a loan of $50,000 and a matching grant of $10,000); Automotive Core Recycling (a company that recycles and sells catalytic converters and other auto parts and received a $250,000 loan) and Katalina’s (a cup cake bakery that received a loan of $30,000 to add equipment and furnishings to their new retail shop).

According to the Department of Economic and Community Development, the $50,000 loan and $10,000 grant “support the creation of three new jobs and retained four,” the $250,000 loan translated into one new position and retained 8 jobs, while the $30,000 loan to the bakery “created one full time job and retained two full time and two part time jobs.”

The Governor’s press release that day announced that the Small Business Express Program has already created or retained more than 1400 jobs in 2013.

Meanwhile that distraught and frustrated father, along with the others who care for Connecticut’s developmentally disabled, try to cope with Governor Malloy’s $6 million cut to employment and day service programs.

Actually, that $6 million cut was part of a much bigger list of cuts Governor Malloy ordered last November 28, 2012.   That day, back in November, Governor Malloy announced $170 million in budget rescissions.

The press release didn’t actually quote Governor Malloy. Instead the task of explaining the cuts was left to Ben Barnes, Malloy’s budget director.  Barnes wrote, “Many of these cuts are very difficult to make, especially now when so many residents continue to struggle in a tough economy, But as painful as they are, cuts are necessary to keep this year’s budget in balance.  State government needs to live within its means.”

The November list included a wide variety of reductions including a $53,000 cut to the Division of Criminal Justice’s Shooting Task Force; a $200,000 cut to the Jobs First Employment Service Program, a $488,000 cut to the state’s Environmental Quality Program; a $335,000 cut to the Department of Health’s Community Health Services Program and $41,000 cut to their Genetic Diseases Program; a $433,000 cut to the state’s Community Mental Health  Centers, a $2.3 million cut to home care services that keep people out of more expensive nursing homes and hospitals and the list goes on and on.

More recently, the state budget plan that Governor Malloy proposed a month ago continued those cuts.  In fact, his new budget makes even deeper cuts to a variety of vital and essential services.

So how is it possible that a Governor would be instituting record budget cuts while giving away record amounts of taxpayer funds to private businesses?

Truth be told, it is the difference between how the State operating budget works compared to the way the State Capital or Bond budget functions.

Even in the desperate times, the Capital budget continues to pump out cash.

The State’s operating budget is paid for with tax dollars.  The State’s Capital Budget is funded via the state’s credit card.

Because we are borrowing the money and then paying the amount (plus interest) back over twenty years, the argument is that cutting the Capital Budget won’t help to balance this year’s operating budget.  This year’s operating budget is still facing a $135 million plus deficit despite the terrible cuts instituted by the Governor and the additional cuts approved by the General Assembly.

Although Connecticut already has the highest per capita debt burden in the nation, since the word “deficit” applies to the operating budget and not the Capital Budget, we end up with a situation in which vital services are cut at the same time money is being handed out.

In fact, if Governor Malloy gets his way, we’ll see more cuts to essential services and more layoffs of hospital and human service workers in the coming months, and at the same time, the General Assembly will be allocating even more money for the Governor to hand out to the private sector.

Malloy presents his blueprint for Connecticut: Record borrowing, cuts to vital services and non-tax tax increases

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There are a lot of things I don’t agree with Senator John McKinney about, but in this case he is absolutely right. Governor Malloy’s proposed budget is a sham and a shame. It is an embarrassment that a Democrat proposed such an irresponsible budget and the Democrats in the Legislature will need to start from scratch.

As Senator McKinney put it, “”There’s so many gimmicks. I don’t know where to stop…This is the most dishonest budget I’ve seen.”

He is sadly correct in his assessment.

Governor Malloy told the Connecticut General Assembly;

“The budget I am proposing today keeps Connecticut moving forward… [and is] “an honest, balanced budget [that emphasizes] living within our means.”

But, in fact, it is a proposed state budget that;

  • Coddles the rich by refusing, once again, to require them to pay their fair share in taxes
  • Includes the largest gas tax increases in state history
  • Shifts tens of millions in municipal aid to the state’s credit card
  • Includes more than $250 million in cuts to vital social services
  • Cuts $146 million in state aid for Connecticut hospitals (on top of the $103 million cut)
  • Eliminates Medicaid coverage for thousands of poor parents who are now covered by the program that covers their poor children
  • Eliminates the Charter Oak Health Plan, an insurance program for those who can’t get affordable healthcare elsewhere
  • Reduces the state’s new Earned Income Tax Credit from 30 percent of the federal EITC to 25 percent (retroactive to Jan. 1), thereby removing a portion of the incentive that seeks to keep the working poor working as opposed to going on welfare.
  • Creates a new tax on power plants and continues a surcharge on the corporation tax — both of which were set to expire next fiscal year
  • Borrows $750 million replace the plan he never implemented to move the state to GAAP financing
  • Creates a $631 million state budget deficit in FY16
  • And MOST IMPORTANTLY balances the budget by delaying repayment of $1 billion that Connecticut borrowed in 2009 under Gov. M. Jodi Rell.

For more on this absurd plan read:

http://ctmirror.org/story/19035/malloy-avoids-big-tax-hikes-uses-borrowing-social-service-cuts-balance-new-budget

http://www.ctnewsjunkie.com/ctnj.php/archives/entry/budget_increases_spending_9_percent_proposes_radical_changes_to_municipal_f/

http://www.courant.com/news/connecticut/hc-state-budget-20130205,0,746324.story

Malloy’s incredible and stunningly irresponsible budget plan makes an appearance

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CT Mirror’s Keith Phaneuf has posted an article outlining the budget plan Governor Malloy will be presenting to the Connecticut General Assembly later today. 

After reading the article, an experienced “Connecticut budget watcher” would be forced to say; “imagine the worst, fiscally irresponsible scenario and then triple or quadruple the negative aspects of the plan” … and you still don’t get to what Governor Malloy will be presenting for the upcoming Fiscal Year 2014-2015 state budget.

Much more will become available as the day goes on, but here are the highlights (or more accurately – low lights) of the Governor’s budget proposal.

While promising a budget that has no new taxes, preserves his education reform program and dramatically expands spending in a few key areas, it is now clear that the Governor’s plans and proposals are virtually completely achieved by adding even more debt to Connecticut – the state that already has the worst existing debt burden in the nation.

Not only does Malloy’s $1.5 billion UConn initiative rely on borrowed funds, but he solves Connecticut’s $1.2 billion projected budget short fall through a complex, even bizarre, borrowing scheme.

The key component of Malloy’s new budget plan relies on getting more revenue from refinancing debt from the last recession, borrowing money to pay for municipal aid that was paid for with general fund dollars in the past and engaging in a new gimmick to make it appear the state is finally moving forward with its shift to Generally Accepted Accounting Principles (GAAP).

In addition, Malloy’s budget proposal raises “about $140 million in new tax revenue by continuing expiring taxes on power plants and other businesses, and by reducing a tax credit for working poor families.

Apparently Malloy’s primary “budget financing plan” includes coming up with an additional $750 million dollars by “delaying repayment of $1 billion Connecticut borrowed in 2009 under Gov. M. Jodi Rell…Originally scheduled to be paid off in the 2015-16 fiscal year, the debt would be extended at least until 2018 in Malloy’s new budget.”

Meanwhile, two years ago, Candidate Malloy promised to immediately move the state to Generally Accepted Account Principles (GAAP).  When Governor Malloy realized the cost of his campaign promise he shifted his plan to make a $75 million down payment in year one, a $50 million down payment in year two and then enter into a 15 year plan to shift the state to GAAP by investing $100 million a year for the next decade and a half.  However, faced with budget deficits over the past two years, Malloy skipped the $75 million payment, then he skipped the $50 million payment and now he will be proposing to borrow the money to shift to state to GAAP, rather than actually make the necessary cash payments to resolve the problem the fiscally responsible way.

In addition, according to this new budget, Malloy will also turn to the state’s already overburdened credit card to provide more municipal aid.  Last year he decided to borrow the funds, rather than pay cash, for the state’s $30 million municipal road aid program.

In this new budget, he is proposing borrowing another $60 million to give towns their Mashantucket Pequot/Mohegan Tribe slot revenue allocations.  In that way, the state could keep all the Native American Indian Gaming funds for itself.

And the most incredible, piece de résistance, is that Malloy’s proposal to increase education funding – the plan he announced yesterday – appears to be paid for by changing (cutting) the Payment in Lieu of taxes program – the grant that towns get for lost revenue from state-owned property.  Malloy’s plan apparently shifts money from the Public PILOT program to the Education Cost Sharing Formula, but calling the funds “NEW MONEY” for education even though the towns aren’t actually getting any additional money.

And as noted above, the CTMirror story suggests that “the governor will propose reducing the state’s new Earned Income Tax Credit from 30 percent of the federal EITC down to 25 percent.”

Finally, the Governor’s plan also re-writes the state spending gap law to allow this increased spending to take place without having to go through the more burdensome supermajority requirements that would otherwise have been needed under the state’s existing spending cap law.

More details to come as Budget Day 2013 progresses.

For the CT Mirror article go to:  http://ctmirror.org/story/19025/malloys-push-avoid-taxes-preserve-education-spurs-more-borrowing

CTNewsjunkie also has additional details at: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/republican_lawmaker_is_not_impressed_with_malloys_budget/

Malloy to present proposed Fiscal Year 2014-2015 state budget on Wednesday

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Connecticut is facing a $148 million budget deficit this year

If the state’s elected officials want to maintain current services, that is adopting a budget that preserves the present level of programs, the state will be facing a $1.2 billion deficit next year.

In addition, a current services budget would mean an expenditure level that is at least $1.2 billion over the state’s legal spending cap.

So what is pushing up state spending?

Andrew Doba, Malloy’s spokesperson, recently told CTNewsjunkie that items forcing the state budget up include, “Medicaid expansion under the Affordable Care Act, fast-growing pension contributions resulting from more prudent assumptions, and our commitment to convert to GAAP.”

Actually, Medicaid expansion under the Affordable Care Act (ObamaCARE) is an extraordinarily small part of the increase in Medicaid spending.  The culprit is the poor economy and growing poverty which are pushing up caseloads. (But it is easier, I suppose, to blame the President)

Second, while pension costs are going up, Malloy’s plan is a drop in the bucket compared to what is needed to properly fund Connecticut’s $22 billion in unfunded state and teacher pension systems, not to mention that they are BELOW what Governor Malloy promised to allocate for those funds.

And third, to blame the conversion to GAAP accounting is beyond absurd.  Candidate Dan Malloy promised to immediately move Connecticut to the path of fiscal honesty by converting the state’s account system to Generally Accepted Accounting Practices. When it became apparent the cost of honesty was “excessive” he proposed making a $75 million down payment last year and a $50 million down payment this year followed by a 15 year program to phase the state to GAAP accounting with a commitment of an extra $100 million a year.

Then, quiet like a mouse, Malloy and the General Assembly skipped the first $75 million down payment, then skipped the second $50 million down payment and the required $100 million initial payment next year is hardly what is causing the $1.2 billion dollar projected deficit.

Then, adding insult to injury, the notion of “balancing the budget” without taxes is simply not true.  Present law already includes the largest gas tax increase in state history that will kick in on July 1, 2014 and Malloy’s budget is certainly going to include the continuation of taxes that were supposed to be eliminated this year.

And meanwhile, those making more than $1 million dollars are still benefiting from the fact that the income tax rate was increased for all middle-income families in Malloy’s $1.5 billion tax increase in 2011, but the rich saw no increase in their income tax rate whatsoever.

And finally, one of the greatest gimmicks of all is already starting to make an appearance.

Connecticut adopted a system of consensus revenue forecasting to remove some of the politics from the administrative branch of government’s desire to look at the world through rose-colored glasses.

The system requires the Office of Policy and Management and the non-partisan Office of Fiscal Analysis to determine what revenue is coming in.

At a press conference earlier today, Governor Malloy announced that an agreement between the State of Connecticut and Amazon had been reached that will require Amazon to collect sales tax from Connecticut residents and send the funds to the Commissioner of Revenue services.

When asked how much is expected from the agreement, Malloy announced that it would come to an extra $15 million a year and that the funds had already been built into his proposed budget.  Malloy said he’d gotten the number from Amazon.

The problem, the Office of Fiscal Analysis, in its official capacity, already projected that the state would get about $9 million from a bill that required Amazon to collect the sales tax and send it on to the state – and that was before this most recent dip in economic activity.

But instead of using the more conservative, and legally appropriate fiscal impact number, or even a number developed through a consensus between his Office of Policy and Management and the Office of Fiscal Analysis, the Governor used an unconfirmed amount AND built the artificially higher number into his proposed budget.

We haven’t even gotten to budget day and already the governor is announcing assumptions that are designed to inaccurately explain away the problems and gloss over the realities of the fiscal crisis that continue to grip our state.

Yet again, fiscal reality is being pushed aside by political expediency.

Update: Next Generation UConn – An additional $1.5 billion in borrowing

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By adding $1.5 billion in new state bonds on top of the remaining $235 million in UConn 2000/21st Century UConn state bonds, Governor Malloy is proposing an impressive plan to invest in “science, technology, engineering and math programs at the University of Connecticut.”

According to the Hartford Courant, “Malloy emphasized that the investment was needed to improve the state’s economy, which some see as stagnating. He predicted that over the next decade the project would attract $270 million in research grants and $527 million in business activity, as well as supporting more than 4,000 permanent jobs.”

“Quite frankly this investment should have been made 10 years ago,” Malloy said. “If it were made 20 years ago, our economy would be stronger today.”

Malloy’s plan would include $450 million for new science and engineering facilities and $770 million in infrastructure improvement, including a major expansion of UConn’s Stamford campus.  The plan would also increase the number of undergraduates attending UConn from 17,000 to about 24,000.

While the University of Connecticut and Connecticut’s other public colleges and universities definitely need more operating support, the Governor proposal overlooks three key points.

First, over the past two years, this Governor has implemented the deepest cuts in state history to the University of Connecticut and the state’s other public institutions of higher education.  UConn alone has been hit with over $50 million in cuts.  It wasn’t that long ago that the state provided about 50 percent of the funds needed to run the University of Connecticut.  As a result of the on-going reductions in support, the state’s share of funding for UConn has dropped below 30 percent.  These cuts have translated into program reductions and much higher costs to students and parents.  In essence, students are already being asked to pay more and get less.

Second, more recognition should be given to the fact that the state has already invested $2.3 billion in the University of Connecticut through the UConn 2000 and 21st Century bonding program.  Those funds have allowed UConn to completely overhaul its facilities.  Thanks to those funds, UConn has a new chemistry building, a new biology building, a new agricultural biotechnology building, a new marine science facility, two new engineering buildings, new and renovated facilities for math, physics and material sciences, a new pharmacy building and numerous other new specialized labs and classrooms.

While more facilities would certainly be optimal, what UConn desperately needs are funds to staff the new facilities and create the appropriate teaching, research and service programs that were supposed to go into those new facilities.

As most people recognize, borrowing should be used for buildings, not on-going programs.

However, in this case, while Malloy’s plan moves money around, significant amounts of the new bonding would be used to pay for new faculty members; 1,400 scholarships for top students; 50 doctoral fellowships; and 2,000 grants for students and faculty to launch projects.

Finally, Connecticut already faces significant debt and long-term liabilities that must be paid.  In fact, these are liabilities that the state MUST pay off in the next couple of decades.  Before adding more debt and liabilities to the state’s books, state officials must take far more aggressive action to increase funding to reduce the existing liabilities.  The following chart summarizes Connecticut’s existing debt and liabilities.

Category Amount of State Debt or State Unfunded Liabilities
State Borrowing $20 billion
State Pension Fund $11 billion
Teacher Pension Fund $11 billion
Post Retirement State and Teacher  Health Benefits $19 billion
GAAP $1.5 billion
TOTAL $62.5 BILLION

 

UConn definitely needs more funding.  A more realistic approach to increasing operating funds would have been a better step forward.

You can read more about Malloy’s proposal via the following links: http://www.courant.com/news/breaking/hc-engineering-uconn-0201-20130131,0,4372437.story and http://ctmirror.org/story/18962/21-billion-plan-uconn and http://today.uconn.edu/blog/2013/01/uconn-state-officials-announce-launch-of-next-generation-connecticut-initiative/

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