Veto Showdown?

According to several reports, Democrats in the legislature have been told to plan to be in Hartford this week to vote on budget fixes to close deficits of as high as $1 billion.

But there are also suggestions that Democrats are planning to vote on a budget that includes professional fee increases and delays in business tax credits. This would seem to be in conflict with Governor Malloy's goal of closing the current deficit without raising taxes. It means a gubernatorial veto of a Democratic budget is more likely. 

Troubling Trends

by CT21 Staff

The under-performance of the local labor market, the high-profile move by General Electric to Massachusetts and chronic political battles over the state budget, are among the factors contributing to structural problems in the Connecticut economy.

This bleak assessment is the conclusion reached by economist Don Klepper-Smith in a newsletter to clients of DataCore Partners, an economic forecasting consultancy.

Unusual Circumstances

A strange dynamic is setting up at the state capitol in the final two weeks of the legislative session.

It appears legislative Democrats, unhappy with a new budget proposal put forward by Governor Malloy, are about to move forward with their own budget plan regardless of the governor's position on the issue. This could lead to a veto by Malloy and an alliance between Malloy and legislative Republicans to uphold such a veto.

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Budget Back in Red

The routine monthly letter from the Office of Policy and Management to the state comptroller illustrates the fragile condition of the Connecticut budget.

Less than a month after closing a shortfall of more than $200 million, the budget is projected to be in the red again by about $141 million. That number is likely to go higher.

The news prompted this statement from Governor Malloy:

Budget Talks

Budget talks are taking an unusual turn this week at the state capitol.

It appears Democrats in the legislature are not happy with a budget plan presented last week by Governor Malloy and have decided to come up with a plan of their own. Meanwhile, Malloy plans to discuss budget options privately with legislative Republicans.

This could be a sign that Democratic legislative leaders have decided they plan to use their superior numbers to push through a budget on their terms. It remains to be seen whether such a plan truly develops and whether Governor Malloy is willing to sign it. All parties are trying to close a nearly $1 billion projected deficit.

Only Agreement So Far on Taxes

With less than three weeks to go in the current legislative session it appears the only budget issue all sides agree on is the need to avoid any new tax increases.

Other than that - legislative Democrats and Republicans seem to be at odds over how to close a nearly $1 billion budget gap. Governor Malloy is said to be growing impatient with the lack of progress. This weekend he published an article in the Hartford Courant explaining his budget priorities.

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Ending Permanent Fiscal Crisis

by Scott Bates

It is true that the governor proposes and the legislature disposes, but there is no doubt Governor Dannel Malloy is on the right track in making a new proposal with the intention of closing a nearly $1 billion projected state budget deficit.

Malloy was not required to offer the plan he put forward on Tuesday of this week, but felt compelled to after the legislature’s budget writing committees did not come up with spending and tax packages that would put Connecticut’s budget in balance. Malloy is setting a standard and articulating an obvious need for state government to dramatically change the way it does business. We cannot afford to live in a condition of permanent fiscal crisis.

Malloy Sets Priorities

For the second time since February, Governor Malloy has presented a budget proposal to the legislature. The latest plan is designed to close a projected $900 million deficit. The governor's plan gets to balance without raising taxes and by canceling some spending programs favored by Democrats in the legislature.

CT21 believes Governor Malloy is on the right track by prioritizing spending based on how much revenue is available, rather than protecting certain programs that are believed to be politically popular. While specifics are open to debate, there is no doubt Malloy is starting the work of balancing the budget with the right question.

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Data Driven

by Michelle Riordan-Nold

In public debate, I increasingly hear the phrase: data-driven decision making. At CTData part of our core mission includes advocating for the public availability of data to inform policymaking. But what does it really mean and what data are we talking about?

As people increasingly use data to inform business or policy decisions, the quality of that data becomes even more important. Using data responsibly is something creators and users need to take seriously. Part of this includes understanding the drawbacks of data collection methodologies.

New Reality

by Scott Bates

It’s decision time in Connecticut. The greatest decisions surrounding government policy often come down to whether government has a spending problem or a revenue problem. In Connecticut, the answer appears to be both. Spending needs to be reduced and because the program requirements of the state's population have dramatically shifted, tax reform – not necessarily higher taxes – needs serious consideration.

CT21 Welcomes New Budget from Malloy

CT21 supports Governor Malloy's decision to put forward a new budget proposal in the coming days.

Although Malloy offered a challenge to lawmakers at the start of this year's legislative session to fundamentally adjust state spending to our new economic reality, efforts made so far to meet the challenge have fallen short.

While CT21 applauds legislative proposals to make spending cuts, and the bi-partisan agreement made last month to reduce spending by $220 million, we remain concerned that state government is still limping along, surviving day to day without a long term strategy that can be considered sustainable.

We do not know the details of Governor Malloy's second budget proposal, but we believe his instincts to continue moving the process forward, and to keep the pressure on lawmakers to look past the crisis of the moment toward long term sustainability, is the right one. We are hopeful lawmakers will meet the challenge in the few weeks remaining in this year's legislative session.

CT21's various white papers on policy options is a good place to begin in the search for ideas.

Layoffs Beginning

All signs suggest next week will be a pivotal week in the state budget process. Governor Malloy plans to release details of his second budget proposal and we now have a hint that layoff notices to state employees may begin in the next few days.

Correction Commissioner Scott Semple has advised his employees that the layoff plan for the correction department has been approved by the administration and nearly 150 people will be losing their jobs. Semple says the announcement is expected in the middle of the month.

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Tax Panel Refuses to Close Gap

The legislature's Finance Committee voted Thursday to increase some fees and delay some previously planned tax cuts, but fell far short of using major new tax increases to close the current state budget gap of $930 million.

The vote, at the committee level, is significant because it signals a preference on the part of both Democrats and Republicans to balance this year's budget without hundreds of millions of dollars in new taxes. The Finance Committee vote came one day after the legislature's budget committee fell about $300 million short in attempting to close the deficit through spending cuts alone.

The committee votes serve as a backdrop for a new budget proposal expected from Governor Malloy next week.

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Extraordinary Budget Plan

Not satisfied with the work of the legislature's Appropriations Committee to close the state's $900 million deficit, Governor Malloy says he will put forward a second budget proposal of his own next week.

Malloy is attempting to close the deficit without raising taxes and by asking the legislature to give his agency leaders greater control over their own budgets.

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Malloy to Make New Budget Proposal

The legislature's Appropriations Committee has put together a budget plan that closes only about half of the $900 million deficit lawmakers are trying to fix by the beginning of next month.

It looks as if the committee is leaving the rest of the problem to either the Finance Committee - which would likely mean new tax increases - or more likely to legislative leadership and the governor. In the meantime, a spokesman for Governor Malloy has revealed the governor will introduce a new budget proposal next week designed to close the entire $900 million gap.

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...A Pound of Cure

It's too soon to say for sure, but there are early indications a preventative healthcare program included in the state employee healthcare plan may be paying off.

The results from an initial study shows state employees are taking advantage of the program, and possibly as a result, certain emergency room visits are down. This trend, if it holds up, would tend to confirm the long term benefits to certain policy changes recommended by CT21.

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Regionalize!

Connecticut municipal officials are being told that now, more than ever, it is in their interest and in the interest of state government, to regionalize services.

The message was delivered last week at a meeting of city and town leaders by House Speaker Brendan Sharkey and Hartford Mayor Luke Bronin.

The imperative to share services has long been a policy goal of CT21 and the potential benefits are supported by the findings of several studies.

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Ignoring Good Advice

For years, Connecticut political leaders have often ignored good advice coming from the private sector or from study groups appointed by fellow government officials.

A member of the Connecticut State Tax Panel feels that once again, in the midst of crisis, state lawmakers are avoiding good advice on property tax reform,  because such reforms would be tough to enact from the political perspective.

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State Employee Benefits

Although state employee union leaders are refusing to talk with the Malloy administration about benefit give backs, lawmakers continue to examine the state employee benefit package as an obvious source of potential savings.

The CT Mirror has an analysis.

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Demographics Create Revenue Problem

As lawmakers try to balance the state budget they are increasingly facing a problem created by changing demographics.

The baby boomer generation is requiring more state services as the group ages, while following generations are smaller and cannot provide the revenue necessary to fund current state services. So argues Alissa DeJonge of the Connecticut Economic Resource Center, Inc.

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Revenue Decline

In his monthly letter to the governor, state Comptroller Kevin Lembo says he remains concerned about anticipated declines in state revenues. Lembo cautions the governor and legislators that even though this week's vote to close a $220 million budget gap constitutes good progress, it is likely falling revenues will continue to put pressure on the overall budget.

The news comes with just over one month to go in this year's legislative session.

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State Employees Retire

In a move that may spare some of their younger colleagues from layoffs, more than 300 long time state employees filed for retirement benefits this week. That's about fifty-percent more than usual.

The decision comes less than a week after Governor Dannel Malloy made clear he does not intend to offer any early retirement incentives and advised state workers that if they want to save their fellow workers' jobs - they might consider retirement now. Malloy is expected to announce a round of layoffs within the next ten days.

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The Road Ahead

Lawmakers were pleased this week with their bi-partisan effort to close the current $220 million state budget deficit even as they face a $900 million shortfall in the weeks ahead. The near unanimous vote tells the story. But there were a handful of no-votes and at least one in the state Senate is getting special attention because of the reasoning behind it.

Senator Art Linares of Westbrook said he had to vote against the deficit mitigation package because his fellow lawmakers have not gone far enough to address the underlying problems plaguing the Connecticut state budget process. It just so happens that Linares is also the youngest member of the state Senate.

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Next Steps

Democrats and Republicans in Hartford have temporarily closed a $220 million budget gap, but in floor speeches Tuesday most made clear that the hard work hasn't even begun.

Legislative leaders noted the state may be facing budget shortfalls of more than $1 billion a year in the next two years. To address this problem without major new tax increases, lawmakers will be forced to re-examine government spending priorities from top to bottom in ways they have been reluctant to do previously. Some stakeholders appear more willing to recognize the serious nature of the challenge.

State employee unions are so far refusing to talk about contract changes that would save money for taxpayers. On the other hand, the head of the state university system, Mark Ojakian, Governor Malloy's former chief of staff, has adopted Malloy's "new economic reality" mantra and is urging his unit of higher education to make the necessary adjustments.

CT21 continues to offer non-partisan, data-based alternatives to current state policies with the goal of reducing costs and improving efficiency. Over the coming weeks, we will offer additional specific proposals we hope government leaders will seriously consider as they seek to get Connecticut's fiscal house in order.