With the state budget deficit ballooning to as high as $80 million, Gov. M. Jodi Rell and Democratic lawmakers announced Friday night that they have agreed to make no changes to the $18.7 billion budget for next year — providing no increases to nursing homes and nonprofit agencies and smaller-than-expected aid for cities and towns.
While municipalities and others were disappointed in the decision, the state budget will still increase by 4.1 percent in the fiscal year that starts July 1. That increase, though, is lower than the 4.7 percent increase Rell sought in her February budget proposal and less than many Democrats had wanted.
The so-called do-nothing budget has been controversial at the state Capitol for the past week as lobbyists for various agencies have fought to obtain more funding for their organizations. The Connecticut Conference of Municipalities, which represents most of the state's cities and towns, has also harshly criticized the proposal because it provides $107 million less to municipalities than they expected.
As the state and national economies continue to weaken, the state's once-projected budget surplus has collapsed into a deficit that has deepened over the past week.
"The state needs to do what the families of Connecticut are already doing: cutting back and doing without," Rell said Friday night. "Forecasts say we will continue to see declining revenues. Economists, Wall Street leaders and business leaders on Main Street all believe we are in a recession — even if Washington has not yet confirmed it."
House Speaker James Amann said the 4.1 percent increase constitutes a solid budget, even though legislators wanted to do more.
"Every day that we pick up the paper, the economy, as we know, continues to slow down," Amann said. "Though we would love to do things for the nursing homes, for the nonprofits, for a lot of people that are in need ... these are tough times. We would all love to do more, but the economy does not allow that."
By deciding to take no action, the legislature leaves Rell with the authority to deal with the budget. Under the law, Rell can cut up to 5 percent from various agency accounts, thus reducing the deficit before the fiscal year ends June 30. On Friday, Rell announced that she has ordered state commissioners to eliminate all non-essential spending for the next two months, including reducing mileage allowances and thus gasoline consumption in state-owned cars by 10 percent. The overall cuts, she said, can be made without layoffs or early retirements for state employees. Rell lacks the authority to reduce municipal aid and entitlements.
If the state ends the fiscal year with a deficit, the shortfall automatically would be filled by the state's "rainy day fund" for fiscal emergencies.
Rell vowed to make enough cuts to fund $10 million in already agreed-upon money to enhance law enforcement. The funds will be used to hire more prosecutors, probation and parole officers and state police detectives in the wake of two deadly home invasions in Cheshire and New Britain in the past year.
In maintaining the level of spending approved last year for the second year of the two-year budget, the legislature literally will avoid making any changes in the budget. Ever since the state began adopting two-year budgets in 1993 as part of a compromise following the creation of the state income tax in 1991, lawmakers and previous governors have still re-opened the budget every year to make adjustments. The decision Friday night thus breaks a 15-year tradition in state budgeting.
Senate President Pro Tem Donald Williams said the legislature's decision was "a default position" because there was no agreement to do anything else.
"I'm very disappointed," he said. "We have gone to the mat. We have fought hard. ... We could do better, and quite frankly, we were close to an agreement."
Regarding Rell's promised veto of any remaining bill with a significant fiscal impact, Williams said, "In an unfortunate way, it does simplify the rest of the session."
No Hoped-For Boost
With the potential deal falling apart, the state's nursing homes and nonprofit agencies that provide state services will receive no increase for the fiscal year that starts July 1. Those groups had been hoping for a 1 percent increase that was recommended by the budget-writing appropriations committee. In addition, a plan to award nearly $20 million in the Early Reading Success Program will not occur — despite the budget committee's recommendation. The money would have gone to about 15 lower-performing "priority school districts," such as Hartford's.
Cities and towns would receive a combined total of $107 million less than they expected under a recommendation recently by the legislature's budget-writing committee. Many towns, however, would still receive an increase over the current year. Hartford, for example, would receive overall state funding of $241 million, compared to about $231 million in the current year, according to CCM.
West Hartford would receive $19.97 million, compared with $18.77 million in the current year. The new total, though, is $817,000 lower than the amount suggested by the budget committee. Simsbury would receive $5.99 million in overall state funding, compared to $5.76 million.
"We're extremely disappointed," said Kevin Maloney, a spokesman for CCM. "The result of this will be increases in taxes at the local level."
The decision Friday night also means that Democrats and Rell have rejected a plan by Republican legislators to offer an early retirement incentive program to more than 11,000 employees in an attempt to save $163 million. Both Rell and Democrats said the plan might offer some short-term savings but eventually would have no long-term benefits as the jobs of the state employees are refilled and the costs to the state's pension fund increase.
GOP To Offer Alternative
But House Republican leader Lawrence Cafero said his caucus will offer an amendment next week for an alternative Republican budget that would include the early retirement plan.
"I'm disappointed that we, as state government, are doing nothing," Cafero said outside the House chamber. "What are we going to say to the private providers? What are we going to say to the nursing homes? What was all that charade in the appropriations committee?"
Cafero said that adopting the Republican plan would be the best fiscal solution for the state and would eliminate any deficit.
He noted that the economic forecasts and the assumptions at the Capitol are that the state will face even more difficult times in 2009 and 2010 — meaning that the current deficit will be relatively small in comparison.
"Right now, it's just cloudy, and we're hurting," Cafero said. "Wait till it starts to pour."
Two hours after Amann made the initial budget announcement shortly after 6 p.m., Rell summoned reporters to discuss the agreement. She concluded her remarks with one of the "kitchen table" analogies that she sometimes uses to illustrate a point about state spending.
"We are no different than any family in Connecticut right now that's sitting at their kitchen table, and they're sitting there with a pen and paper ... and they're saying this is how much more money we're bringing in right now," Rell said.
The family may be trying to figure out how to afford just "a one-week vacation with the kids this year," she said, "and they're sitting there saying, 'OK ... you know, if we eat pasta next week instead of having chicken, which we've been eating for the last month, then we'll be able to do this.'
"Families all across Connecticut are making those decisions every night. Connecticut has to do the same thing," Rell said. "And that's the decision we made today."
Rell said her desk is piled with legislation, and some of the new bills with a budget cost of $80,000 or so "can be absorbed within available appropriations." But she warned lawmakers, there also are "some bills out there that have a $1 million, $2 million, $6 million price tags to them. Don't send them to me."
The state's budget deficit has been getting worse on a daily basis. Rell predicted on Wednesday that the deficit would reach $19 million, and state Comptroller Nancy Wyman projected the deficit at $67.7 million the following day. Depending when the state receives various reimbursements from the federal government, the deficit could be as high as $80 million, according to the legislature's nonpartisan fiscal office.
Courant Staff Writers Jon Lender and Mark Pazniokas contributed to this report.
Reprinted with permission of the Hartford Courant.
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