Senate Minority Leader Len Fasano, R-North Haven, answers a question during Tuesday’s press conference. At right is House Minority Leader Themis Klarides.
House and Senate Republicans would furlough all state workers for two days, reduce legislators’ pay, eliminate posts in Gov. Dannel P. Malloy’s administration and reduce spending for education, social services and other programs to balance state finances by June 30.
The GOP says its plan not only would close a $220 million shortfall, but also would restore $140 million in suspended payments owed to Connecticut’s hospitals.
Republicans also would cancel a $24 million deposit into the sales tax revenue-sharing program, arguing that much-larger projected deficits in the next few years almost certainly will scuttle the Democratic majority’s 2015 plan to begin sharing sales tax receipts with cities and towns starting next fiscal year.
And while Malloy said through a spokesman that he disagreed with some portions of the plan, the Democratic governor called it “an honest effort” and indicated he would sign it into law, if enacted.
Malloy challenged legislators from both parties last week to offer ideas to mitigate the deficit and restore hospital funds. Democratic legislative leaders wrote the governor Monday and said they still are developing several ideas involving municipal aid, state contracts with private vendors and other options.
“Democrat lawmakers and Governor Malloy have failed to lead our state and have driven us into the ground,” House Minority Leader Themis Klarides, R-Derby, said. “It’s extremely challenging to fix a budget with only a few months left in the year, which is why Republicans asked Democrats to work together at the start of the year to address our imminent deficit. By now, most money has already been spent. This deficit mitigation package enables us to make the most of remaining state funding with targeted cuts, cuts to the legislature, and preservation of the most vital state services.”
“We are facing the byproduct of failed Democrat fiscal policies, not a new economic reality,” said Senate Minority Leader Len Fasano, R-North Haven. “Republicans have been predicting this fiscal crisis for over six years and offering our ideas to address the problems time and time again. The Democrats got our state into this mess, but it is Republicans who will lead us out.”
Many program cuts — and two furlough days
The Republican plan cuts about 15 percent from the fourth-quarter funding for most components of the state budget, which would save about $83 million.
Another $33 million in reductions would be ordered, also across a variety of programs, including $12.9 million from charter schools. This would reduce the state’s per pupil payment from $11,000 to $9,625.
Connecticut’s public colleges and universities would shoulder a hefty share of the cuts, losing about $33 million.
Republicans also want to save $8 million by asking all state employees to take two unpaid days off before June 30.
Fasano and Klarides said this would require negotiations with state employee bargaining units to get all unionized personnel included.
But Fasano also predicted that many rank-and-file workers would agree to this, especially if it were part of a larger plan to forestall any layoffs.
It is still unclear whether that would be possible, though.
Malloy’s plan to balance the next fiscal year’s budget hinges upon reducing the workforce by “several thousand” workers, according to his budget director, Benjamin Barnes.
The governor, who has said layoff notices are likely to go out very soon, would be hard pressed to reduce the workforce by more than 1,500 through retirements and other attrition alone — based on recent trends.
“This is an honest effort,” Malloy spokesman Devon Puglia said of the GOP plan afterward. “If this plan or one like it were negotiated and passed by the General Assembly, the governor would sign it.”
“We do not agree in the specific with every line item reduction, specifically those to the Children’s Medical Center, school reform and higher education, and cuts to property tax relief,” Puglia added. “At the same time, our new economic reality demands that we all make compromises in order to reduce overall spending.
“While we await legislative action, the administration will continue to move ahead with rescissions within our statutory authority. As the governor has said, if we act quickly to close the current year deficit, these actions need not include cuts to hospital supplemental payments. If we cannot act quickly, all options will need to be put back on the table.”
Hospitals would get suspended payments
Connecticut has just $406 million in its rainy day fund, a modest emergency reserve equal to only 2.2 percent of annual operating expenses.
Besides sparing that reserve from being reduced further, the other big prize in the Republican plan, GOP leaders argued, is that it would restore $31 million in state funds owed to hospitals.
Making those payments would trigger release of another $109 million in matching federal funds to Connecticut, which also would be sent to hospitals.
The hospital industry has argued in recent years it has come under extreme fiscal duress as a state provider tax has changed dramatically.
The Malloy administration has countered that hospitals do a lot more business treating Medicaid patients since Congress passed the Affordable Care Act, and that facilities still can afford to pay their executives exorbitant salaries.
Hospitals originally paid about $350 million in provider taxes in 2011-12, the program’s first year, but got back $400 million in state and federal reimbursement payments.
That mix gradually shifted though, as the state struggled with one budget deficit after another. This fiscal year the hospitals will pay in about $560 million and — after Malloy recently suspended the $140 million owed them by June 30 — expected to receive back just $22 million this fiscal year.
Governor, legislature asked to sacrifice directly
The Republican plan challenges the executive and legislative branches to sacrifice in new ways.
Lawmakers would face a 10 percent pay cut.
Legislators, who last received a raise in 2001, earn a base salary of $28,000, though more than half receive additional funds for holding leadership posts. Total compensation is $32,241 for assistant leaders and committee chairmen, $34,446 for deputy leaders, $36,835 for the majority and minority leaders, and $38,689 for the House speaker and Senate president pro tempore.
In addition, all representatives receive another $4,500 and all senators another $5,500 for miscellaneous expenses that do not have to be documented.
This miscellaneous funding would be reduced by 10 percent under the Republican plan, which would eliminate fourth-quarter funding for legislative mailing privileges and cut $100,000 from each of the Democratic and Republican caucuses, in both the House and Senate.
The Malloy administration would be asked to eliminate two of its undersecretary — or deputy posts — in the Office of Policy and Management, its chief budget and policy development agency.
Republicans also want Malloy, who heads the Democratic Governors’ Association, to seek reimbursement from that group for the state security services Malloy uses while on DGA activities. This would save $50,000, according to the GOP plan.
Is sharing sales tax receipts an impossible promise?
Republicans also challenged the Democratic majority to acknowledge that a major promise to share state sales tax receipts with cities and towns is likely not to be kept.
The budget Democrats adopted last June calls for municipalities to receive $220 million in sales tax funds next fiscal year, and almost $290 million in 2017-18. Roughly one-third of those monies would be used to cap property taxes on motor vehicles in urban communities and others with a high mill rate.
But nonpartisan analysts already are projecting state budget deficits of $900 million for next fiscal year and more than $2 billion — or seven times the promised sales tax money — in 2017-18.
Further complicating matters, the state already has delayed efforts to save for this program.
The first $70 million of the $220 million owed next fiscal year was supposed to have been deposited into a holding account already. But the Democratic majority postponed that deposit last December to close another deficit in the current budget.
With nothing saved to date, and huge deficits looming in the future, Republicans said the next deposit owed into the holding account — about $25 million due before June 30 — also should be suspended.
“It’s not realistic and it never was from the beginning,” Klarides said, noting that nonpartisan analysts were forecasting deficits larger than the promised sales tax money even before the revenue-sharing program was approved.
The House minority leader challenged Democratic legislators to be frank with their constituents about the likelihood of all of these promised funds being delivered.
“I don’t know how they go out there and they say, ‘Don’t worry. It’ll be fine,” she said. “You cannot have a clear conscience.”
“This is a promise that would be very difficult for the state to keep given the fiscal nightmares down the road,” Fasano added.
“We are committed to protecting the money that’s in” that program, Gabe Rosenberg, spokesman for the House Democratic Caucus, said afterward.
“Aside from the Republicans’ tiresome partisan rhetoric, it is a comprehensive proposal that brings forth many of the ideas we have all been talking about, and when the Democrats’ recommendations are completed later this week, I look forward to finalizing a package and a bipartisan vote to balance the current fiscal year,” House Speaker J. Brendan Sharkey, D-Hamden, said.
“Looking past the partisan attacks, I think there is a lot of overlap between today’s Republican proposal and a Democratic budget plan,” Senate President Pro Tem Martin M. Looney, D-New Haven, said. “… There is much in this budget that may reflect a bipartisan consensus.”
But Looney also said there remain some differences, including the Republican call not to deposit sales tax funds in the revenue-sharing account. “Senate Democrats are committed to lowering the municipal tax burden on Connecticut residents and will not accept this Republican tax increase,” he said.
Republicans retreat on some fiscal principles
The GOP did backtrack on some of its fiscal principles to put this plan together, including sweeping about $22 million from more than a dozen small funds.
They also recommended canceling a previously approved transfer of $18 million in state revenues from this fiscal year to next. So while that eliminates $18 million in red ink this year, it would add a matching amount to next fiscal year’s projected deficit.
But the Republican plan also cut into several social service programs, something Fasano had argued should be spared during many past budget debates.
Proposed reductions included:
- $7.8 million from the Department of Social Services;
- $3 million from the Department of Mental Health and Addiction Services;
- More than $443,700 from the Department of Public Health;
- And more than $313,300 from the Department of Rehabilitative Services.
The Connecticut Children’s Medical Center, the Connecticut Mental Health Center, support services for AIDS patients, lead poisoning prevention among children and education aid for blind children were among many programs targeted for cuts.
When asked about the fund sweeps and cuts to areas he had argued to protect in the past, Fasano said these options could have been avoided — had alternative Republican plans to cut state spending been taken seriously over the past 12 months.
With only three-and-a-half months left before the fiscal year ends, “there are not as many (deficit-reduction) alternatives as we would like,” he said.
Fasano and Klarides have been pushing since last April to restructure state spending on labor. Besides tighter restrictions on overtime, they also have argued for Malloy and the state employee unions to reopen an existing contract and:
- Increase worker health insurance costs;
- Eliminate longevity pay;
- Increase worker contributions for pensions;
- And tighten retirement benefits.