“Despite these challenges, Governor Malloy is committed to…NO tax increases.”

Oh, yeah, ah….

Except for that 4 to 8 cent gas tax increase that is already scheduled to kick in on July 1st 2013. (And well, maybe a few other efforts to enhance revenues).

Ben Barnes, Governor Malloy’s budget chief addressed the General Assembly’s revenue and spending committees yesterday about this  fiscal year’s $365 million deficit and next year’s projected $1.2 billion shortfall.

Much of the discussion surrounded Malloy’s position on increasing taxes and the meaning of a PowerPoint presentation that Barnes’ provided that included a slide that read;

“Despite these challenges, Governor Malloy is committed to:

  • Ensuring the state lives within its means.
  • Hard spending cuts.
  • NO tax increases.”

Apparently the “NO tax increases” wasn’t meant as “a statement of fact.”

Republican legislators wanted to know if the Malloy Administration was going on record saying that the Governor would not propose any tax increases to address the growing state deficit.

OPM Secretary Barnes responded with phrases like, “I have no intention” of raising taxes, but added, “I’m not going to make an absolute promise…”

Barnes also side-stepped questions related to what the CTMirror described as “a myriad of other revenue-raising scenarios that some might argue are equal to a tax increase.”

Thanks to President Bush #1, the concept of “No New Taxes” is indelibly ingrained in the American political lexicon.

But of course, at least one of the elephants in the room is the major tax increase that is already built into the Connecticut state budget.

As the result of the upcoming increase in the state’s wholesale tax on petroleum, the price of a gallon of gas will go up 4 to 8 cents on July 1st, in addition whatever other prices increases are coming as a result of “market pressures.”

Why?

Connecticut has two gas taxes.  In addition to the standard gasoline tax of 25 cents that is collected at the gas pump, Connecticut drivers are paying another 22 cents a gallon due to the state’s wholesale petroleum tax, which is collected when the gasoline arrives at the wholesaler.

Under present law, the state collects an effective tax rate of 7.53 percent on the wholesale price of gasoline.

Last year, the legislature placed a one year cap on that tax so that it would not exceed 22.6 cents.

However, the wording of the existing state statute is that the cap comes off on July 1, 2013 and the tax rate increases to 8.81 percent.

At today’s prices, this will boost the price of a gallon of gas by about 4 cents.  If gas prices return to their previously high levels, the tax would add as much as 8 cents to the price of a gallon of gas.

This 17 percent increase in the petroleum gross receipts tax will bring in about $50 million at today’s gas prices.

Back in 2005, when Connecticut adopted its present transportation infrastructure initiative, the original tax increases in the wholesale tax were sold as part of the mechanism to fund the transportation improvements.

Since then, the wholesale tax increases in 2005, 2006 and 2007 have brought in close to $2 billion dollars.  However, about 60 percent of that money has been used for general fund expenses rather than transportation related costs.

Considering the magnitude of the budget deficit facing Connecticut, and Governor Malloy’s previous efforts to reduce expenditures for transportation initiatives, taxpayers can certainly expect that the additional $50 million the July 2013 increase will bring in will be used to cover the deficit rather than for its intended purpose.

For more on Malloy’s “NO tax increases” position, check out CT Mirror at http://ctmirror.org/story/18288/lawmakers-press-malloys-budget-chief-clarify-position-taxes, CTNewsjunkie at http://www.ctnewsjunkie.com/ctnj.php/archives/entry/barnes_takes_no_pleasure_in_cutting_spending/, CT Post at http://www.ctpost.com/news/article/Conn-lawmakers-scrutinize-1-2-billion-deficit-4071541.php

Dan Haar also has an excellent assessment of the situation here: http://courantblogs.com/dan-haar/state-budget-crisis-2013-16-nowhere-to-hide/

UConn’s new $227,500 PR guy – don’t worry taxpayers – parents & students are paying…

Last week came the news, via Kathy Megan at the Hartford Courant, “The University of Connecticut has hired a new vice president of communications at an annual salary of $227,500.”

Okay, so some people were upset because with 171,000 Connecticut unemployed residents, not to mention the thousands of highly trained public relations professionals who work and live in Connecticut, UConn’s President wasn’t able to find a single qualified candidate for this new position and had to go out of state to hire her new communications person.

But the good news is that Connecticut’s taxpayers don’t have to pick up the tab for President Herbst’s new assistant.

But $227,000 plus benefits (which, thanks to the CTMirror we now know is more than the national average).

Not that long ago, the person who worked as UConn’s top PR guy was called the Director of Communications.  A promotion changed his job title to Assistant Vice President, then Associate Vice President and now President Susan Herbst has decided to grant the next guy the title of Vice President.

The long-time state employee, who was doing the job before, retired in 2009 with a salary in the range of $225,000.  He now collects a lifetime state pension of $114,000 (going up each year thanks to a cost of living adjustments.)

The next guy picked up the title of associate vice president and his salary jumped from $180,000 in 2010 to $203,000 in 2011.

Of course, in both cases, those amounts only reflect the base salary.  When you add in the cost of benefits, including health insurance, pension, etc., you increase the person’s total compensation package by about $45,000 or so.

Officially, the salary and compensation package for the outgoing associate vice president was $248,866.70 in 2011.

Now along comes Tysen Kendig, who will be leaving the University of Iowa, to join UConn as vice president for strategic communication.  His salary of $227,000 will be augmented by about $50,000 in benefits, putting him on the first rung of the ladder with a total compensation package of just over $275,000.

But before taxpayer’s start to yelp…you can rest assured that the burden for these growing costs will be paid for by UConn’s parents and students through tuition and fees and not by taxpayers.

Over the last 20 years, the State of Connecticut has been covering a smaller and smaller portion of the costs associated with running the University of Connecticut.

Back in the “old days,” when I was a state legislator, the state picked up about half the costs associated with UConn’s budget.  When Governor Malloy was done implementing the deepest cuts in Connecticut history to our public colleges and universities, the state’s share has dropped to 27 percent of the UConn Budget.

Now, about 73 percent of the money needed to run the University of Connecticut comes from tuition, fees, with smaller amounts coming from federal grants and some private fundraising.

This year, the State of Connecticut will send about $280.3 million in taxpayer funds to help cover the costs of running UConn.

However, UConn spends $565 million to pay the salary and benefits associated with the teachers, professionals and support staff that run the day to day operations of the $1 billion enterprise known as the University of Connecticut.

So when Susan Herbst and the UConn Board of Trustees decide that UConn needed a new $275,000 Vice President, the cost is NOT coming from taxpayers but from parents and students, who are already struggling to meet record high tuition costs.

You can read more about the story at the Courant:  http://www.courant.com/news/education/hc-uconn-new-vice-president-20121119,0,1975413.story and at the CTMirror: http://ctmirror.org/blogs/new-uconn-spokesman-will-make-more-national-average

And Colin McEroe added to the discussion with a commentary piece that you can read here: http://www.courant.com/news/opinion/hc-op-mcenroe-uconn-administrators-salary-bloat-11-20121123,0,2362201.column

FOOTNOTE:  And for those left scratching their heads about this year’s $365 million deficit and the $1.1 billion shortfall next year, these key employment decisions must be approved by the UConn Board of Trustees.  Not only does the Governor appoint the Chairman and the majority of the members of the Board of Trustees, but Malloy’s Commissioners of Education, Agriculture and Economic Development are automatically members of the UConn Board.  Even more importantly, under Connecticut law, the Governor actually serves as the President of the Board of Trustees and has a personal representative attend all board meetings.

In fact, of the hundreds of boards and commissions in Connecticut, a sitting Governor has more control over the UConn Board of Trustees than he or she has over virtually any other government entity.

Could Connecticut’s state deficit really jump from $60m to $365m in a month? That would be a No

According to Connecticut law, by the twentieth day of each month, the Governor’s Office of Policy and Management must provide the Office of the State Comptroller with a statement of “revenues and expenditures for the General Fund.”

Using this information, and his own budget experts, the State Comptroller then produces the state’s official financial statement that is released on the first of each month.

A couple of weeks before the election, OPM reported that the projected deficit was $60 million.

A couple of weeks after the election, OPM reported that the projected deficit was $365 million.

As to the question of whether a state deficit could leap from $60 million to $365 million in thirty days, the answer is a simple and resounding – “No.”

So what is going on?

On October 19, 2012, Ben Barnes, Governor Malloy’s budget chief, wrote to State Comptroller Kevin Lembo to report, “We are projecting the General Fund will experience…a $60.1 million shortfall on a budgetary basis, a change of $33.2 million from last month.”

Now, thirty days later, OPM Secretary Barnes, in his monthly letter to State Comptroller Kevin Lembo, is observing that the projected budget deficit is actually six times larger than he had projected, only a month ago.

Now Barnes is reporting that state revenues are down ANOTHER $144.9 million, including $100 million in “unexpected refunds” of income and corporation taxes.   OPM lowered the amount the state is expected to collect from the corporation tax by $51.8 million and the amount that will come in from the state sales tax by $43.7 million.

Even more enlightening is that whereas OPM alluded to the fact that it will probably spend $100 million more than expected on health care costs for poor, Medicaid recipients, the letter Barnes sent to Lembo yesterday reports that the Malloy Administration will spend at least $294.1 million MORE than the amount allocated in the state budget that was passed by the Legislature and signed into law by the Governor.

The number is at least $160 million more than OPM projected last month.

Tens of millions of dollars in excess spending is related to costs in non-Medicaid spending, including cost over-runs in the Department of Corrections, the Department of Emergency Services and Public Protection and in other state agencies.

It would appear that some of these higher costs are related to excess personnel costs meaning that Malloy Administration knew for quite some time that payroll costs were going to exceed what had been budgeted for those agencies.

Last week, Governor Malloy and his advisers sought to dismiss any criticism by suggesting that State Representative Larry Cafero, the Republican leader in the House of Representatives, was merely trying to score political points by criticizing the Administration’s handling of the budget.

However, Malloy and some in the media, who simply run with that story, are doing a tremendous disservice to the truth.

While Cafero may very well be attempting to score political points, after all, he is a politician and the political leader of the opposition party; the issues he is raising are legitimate.

In fact, if the tables were turned and it was a Republican Governor announcing massive budget deficits, the Democrats would be calling for legislative hearings and some would even be suggesting that Administration Officials be called to testify, under-oath, so that the Legislature could determine who was involved in the effort to cover-up the magnitude of the budget problems leading up to the election.

The budget analysts who work for the Office of Policy and Management, the State Comptroller and the Office of Fiscal Analysis are some of the most talented people in their field.  There is absolutely no question that some of these experts understood the magnitude of the budget problem.

The unanswered question is not whether the professional staff within state government understood that the budget crisis was getting worse, but why those in more political positions chose to withhold the information from the public.

CT Newsjunkie has the latest at: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/barnes_confirms_365m_deficit/ or you can read OPM Secretary Barnes’ letter to State Comptroller Kevin Lembo at http://www.ct.gov/opm/lib/opm/budget/comptrollerletter/fy2013/2012nov20comptrollersletter.pdf

“This is not a deficit…It’s a shortfall” – Governor Malloy 11-15-2012

No, this is not a segment on the Daily Show, although it is certainly worthy of what Jon Stewart and his team of award winning writers come up with.

Let’s take a step back, a deep breath and try this again…

What we do know is that Connecticut is facing a “fiscal problem.”

The Governor proposed, the Legislature passed and the Governor signed a state budget into law.

Now, state revenue is coming in below what was projected.

And state expenditures are higher than what was projected.

Those two developments create a problem.  For now let’s call the problem a “gap.”

On November 1, 2012 the Malloy Administration said the gap was $60 million dollars.

In the days after the election, the Malloy Administration said the gap was actually bigger than $60 million.

At first they said that revenue had dropped by about $52 million from a report that was released last April.  However, the state budget that passed and was signed into law wasn’t based on the report that they were referencing, but instead, it was based on the amount of revenue in the report plus an additional $75 million in revenue.

So while revenue was $52 million below the April Report, it was actually $128 million below the budget.

But before people get too confused about the $52 million versus the $128 million, they can rest assured that neither number was an accurate description of the size of the gap.

That is because the real gap, at the time, was over $300 million.

To make a long story shorter, the Malloy Administration then admitted that this year’s real gap was $365 million.

And then, the next day, they admitted that the gap was $365 million for this year and $1.1 billion for next year.

Perhaps most impressive is that fact that all of this occurred between November 1 and November 15, which, by the way, is sometimes called a fortnight.

And then Governor Malloy spoke to the media, and as report in various media, including the Hartford Courant, we learned that, “Malloy refused to use the word “deficit” and instead said the current situation is a “shortfall.”

The Courant story added, “’This is not a deficit,’ Malloy told reporters Thursday at the state Capitol. ‘It’s a shortfall.’”

Now some, including House Republican leader Larry Cafero, have been speaking out about these developments.

Cafero told the Courant and others, “For the governor to come out with a press release using the figure $52 million is wrong. At worst, it’s deceiving and deceitful. Where does he get $52 million when the report itself says $128 million?”

Representative Cafero went on to tell reporters, “For the governor to put out a press release on $52 million is the least transparent, most deceitful thing I’ve seen…”

When asked about the accuracy of Mr. Cafero’s comments, Governor Malloy responded…

“He’s wrong. Representative Cafero has expressed his desire to become governor of the state of Connecticut. You folks are going to have to get used to putting everything in context, and I’m sure that that will appear in your papers every time you report what he has to say. Having said that, he’s wrong. I don’t know how else to say it.  The data is the data.  The data becomes available when it’s available.”

While we are discussing semantics, we should probably add that the Connecticut Constitution and state laws require that the state go out and borrow the funds necessary should it end the fiscal year in the red, often referred to as a deficit.

So if we want to be really technical, Connecticut can have a projected deficit but it can’t have a real deficit because a real deficit would mean that the State ended the year in the red, which would trigger the state going out to borrow money to fund that shortfall, which means there would no longer be a gap, shortfall or deficit.

I’m not sure if that strengthens or weakens the positions taken by Governor Malloy and Representative Cafero, but I’d hate to see us squander much more time talking about whether the gap is really a deficit or a shortfall.

Finally, as to Governor Malloy’s observation that ” The data becomes available when it’s available,” considering I’m not trained in quantum physics, I simply don’t feel qualified to comment on his observation.

Malloy’s budget chief admits to $365 million state budget deficit

You are reading that correctly – despite the Governor denying this reality 48 hours ago, Secretary of the Office of Policy and Management, Ben Barnes, is addressing a legislative committee today and will admit that the state budget deficit is at least $365 million dollars.

In the days leading up to the election, the Malloy Administration stuck to their claim that the state budget deficit was $60 million.

Just three days after the election, the number they’d admit too increased by another $50 million.

But as Keith Phaneuf wrote in the CTMirror, and as was reported here at Wait, What?, the true deficit was at least $300 to $350 million.

A state budget of $365 million is, as Phaneuf writes, “nearly double the level needed to compel Gov. Dannel P. Malloy to prepare a deficit-mitigation plan, according to written testimony from Malloy’s budget chief.”

Barnes’ told the Legislature that, “All told, these changes result in a projected deficit of $365 million.”

Barnes was silent on why the Malloy administration provided State Comptroller Kevin Lembo with different, and inappropriately more rosy numbers just days ago.

Check back tomorrow for some more information about the budget deficit and why the Malloy Administration might have worked so hard to keep the magnitude of the problem secret for as long as they could…

The CT Mirror, CTNewsjunkie and other media outlets have updated stories on the budget deficit.  You can find the latest details about the ugly budget situation at the CTMirror  http://www.ctmirror.org/story/18201/malloys-budget-chief-confirms-365m-deficit-testimony-legislature and at CTNewsjunkie: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/deficit_hits_365m/