Republicans Seek Special Legislative Session To Cut State Budget [Hartford Courant]

HARTFORD — Top Republican legislators called Friday for a special legislative session to be convened by Dec. 15 to start solving the state’s budget problems.

The two new Republican leaders, Sen. Len Fasano of North Haven and Rep. Themis Klarides of Derby, said the legislature needs to act quickly to rein in state spending.

They said the state’s projected deficit of $99 million for the current fiscal year is actually higher because the state is not collecting back taxes at the rate that was projected when the budget was approved by the legislature.

Gov. Dannel P. Malloy’s administration said that $75 million in back taxes would be collected through increased enforcement efforts in the current year, but only $30 million has been collected so far.

“We cannot reach a solution and properly address the true severity of our current problem unless we sit down together and work across the aisle to change course and get our finances back on track,” Fasano and Klarides wrote in a letter to Malloy and top Democratic legislators.

But the minority Republicans don’t have enough votes to force a special session, and the Democrats say that the budget deficit can be closed without a vote by the full legislature.

“There is no need for a special session,” said Andrew Doba, Malloy’s spokesman. “The rescissions that were announced [Thursday], in addition to the management measures that were announced more than a week ago, are more than sufficient to address this minor shortfall.”

The two top Democrats in the Senate, President Pro Tem Donald Williams and Majority Leader Martin Looney, both said that a special session was “unnecessary” because Malloy was making cuts within his authority under state law.

The state’s budget problems were front and center at a public hearing Friday that lasted for nearly three hours. In addition to a projected deficit in the current fiscal year, the legislature’s nonpartisan fiscal office is estimating combined deficits of $4.47 billion over the next three fiscal years, starting in July 2015.

Alan Calandro, the fiscal office’s director, told legislators that the state has problems both on the spending and taxing sides of the budget. In the short term, the state is still trying to obtain about $200 million in additional funds from the federal government for Medicaid that is currently under negotiation. The federal budget has not yet been adopted, and the government has been funded under continuing resolutions.

“That’s where the bigger problem is — on the revenue side,” Colandro said. “We have not been able to get that additional revenue.”

If the state suddenly received an extra $200 million, that would solve the projected deficit for the current fiscal year. Both Malloy and state Treasurer Denise Nappier have cited the $200 million as an important source of money in the efforts to balance the budget.

Calandro testified Friday at the annual joint hearing of the finance and appropriations committees on the state’s Fiscal Accountability Report, which is required by law. Both the fiscal office and the governor’s budget office are required to submit reports to the legislature each November.

Calandro said that state officials will be closely watching the collection of state income taxes leading up to the April 15 tax deadline. At more than $9 billion annually, the state income tax is the largest revenue generator in the state budget by far, accounting for about 53 percent of the total. The sales tax is in second place at more than $4 billion for the current fiscal year. Sales tax revenues were affected by the deep recession as consumers cut back on spending, and have remained sluggish.

Malloy has pledged that he will avoid deficits because the projections assume that the state budget will increase annually by 7.8 percent to maintain current levels of services. In the recent election campaign, Malloy said repeatedly that he would not allow the budget to increase by that amount, saying that it never happened during his first four years in office.

Over The Spending Cap

Besides the deficits, the fiscal office is also projecting that the state would be above the state-mandated spending cap that is designed to control spending.

If the current level of services remains in effect, the state would be above the spending cap by $590 million in the next fiscal year, $692 million in the 2017 fiscal year and $871 million in the 2018 fiscal year. The governor’s budget office also showed spending above the cap, based on the current services projections.

“The governor will propose a budget that is balanced, that is under the spending cap” and will not rely on raising taxes, said Karen Buffkin, the No. 2 official in Malloy’s budget office, who made the presentation to legislators Friday. “In 2015, our budget will be balanced.”

“Our income tax projections are highly dependent on capital gains,” Buffkin said, noting that trends on Wall Street have a large effect on the state’s revenues. “April continues to be our big month.”

After Buffkin told legislators that employment was increasing and that the state economy was rebounding, Rep. Arthur O’Neill of Southbury asked why, if that was the case, state revenues were not coming in faster?

“Do we still face fiscal challenges? Yes, we do,” Buffkin responded. “What is occurring now is good news for the Connecticut economy. … Yes, Connecticut’s economy is improving. Yes, these are good times. … We will balance that budget as the governor has done over the past four years.”

With those improving economic factors, then, O’Neill said that the state should be having surpluses instead of deficits.

Sen. Toni Boucher, R-Wilton, said that the sluggish economy has not gone away. “We’re feeling that we’re stuck in the mud here,” Boucher said.

On an annual state budget of about $20 billion, the projected deficit of nearly $100 million represents about 0.5 percent, said Sen. John Fonfara of Hartford. For a family with $100,000 in income, that would be the equivalent of a $500 deficiency, he said.

“We’re not in the worst place right now, halfway through the fiscal year,” Fonfara said.

Sen. Beth Bye, a West Hartford Democrat who is co-chairwoman of the budget committee, agreed that the problem was relatively small on a percentage basis in the current year and that actions were already being taken to make sure that the budget will be balanced.

She said, however, that she was concerned about more than $6 million in proposed cuts at the Department of Children and Families concerning temporary group homes for troubled children. Buffkin said that the department still had millions of dollars to help children with board and residential care.

Sen. Rob Kane, the ranking Senate Republican on the budget committee, said that the forecasts were “rosy” before the gubernatorial election and that the Malloy administration said there were no deficiencies from overspending in various state departments. Now, however, the state is looking at a deficit of nearly $100 million that had been projected as a modest surplus of $300,000 only one month ago.

“I don’t want to sound like Oliver Stone, but what happened in between?” Kane asked.

With the budget cuts that were announced this week, combined with a hiring freeze and spending restraint, Buffkin said that the state would end the fiscal year in the black.

Later, Kane said, “There are people on our side of the aisle who think things may be worse.”

Republicans said the deficit figure does not include $31.8 million in health expenses for retired state employees, $10 million for autism care through Medicaid and $10.5 million in overspending in personnel costs in the state prison system.

Buffkin said that the retiree health expenses were “on the radar” on a “watch list” of potential problems, even though the number was not included in the calculations.

“There are a lot of things that can happen during the course of a fiscal year,” Buffkin said.

One of the issues in the budget is that Malloy’s administration said that the state tax department could receive an additional $75 million by increased enforcement efforts and collection of back taxes that had not yet been paid. As of Friday, $30 million of that total had been collected, while state officials were still trying to collecting the other $45 million. Much of the $45 million is related to expected collections through the state’s sales tax.