Calculation Error Puts Malloy’s Budget Over State Spending Cap [CT News Junkie]

Article as it appeared on CT News Junkie

A calculation error acknowledged Tuesday by Gov. Dannel P. Malloy’s budget office puts the governor’s budget proposal $54 million over the state spending cap in 2016 and will force the administration to propose adjustments.

“On behalf of the agency, I personally apologize for this discrepancy, and commit to working with [Office of Fiscal Analysis] and the legislature to identify the adjustments necessary to ensure compliance with the expenditure cap,” Benjamin Barnes, Malloy’s budget director, said in a Tuesday afternoon statement.

According to the statement, the administration entered incorrect data when calculating the expenditure cap. Revised data show the 2016 spending ceiling to be $60 million less than the administration thought when it submitted the budget to the legislature. The second year of Malloy’s two-year budget still falls $80 million beneath the spending cap.

“The discrepancy occurred when data was pulled from an outside vendor in January 2015. A feature of this new vendor’s reporting system resulted in a one-quarter shift which was not recognized by OPM until after the governor’s budget had been prepared and submitted,” Barnes wrote.

The spending cap, which was instituted at the same time as the income tax, is calculated by tying increases in state spending to either personal income growth or the rate of inflation. In his letter to lawmakers, Barnes explained he used a personal income growth rate of 2.98 percent when he put together the budget. However, he should have used 2.58 percent.

The error could be considered the second, if state Treasurer Denise Nappier is correct about the amount of debt service the Malloy administration excluded from the budget. Nappier pointed out that Malloy’s budget counts on $325 million in bond premiums that have yet to be realized. The two have been going back and forth all week over the discrepancy.

The Office of Fiscal Analysis agrees with Nappier, but Barnes insists his numbers are correct. Barnes told Nappier on Monday that the calculation is based on “inexorable logic of arithmetic.”

“Governor Malloy’s proposed budget reflects his point of view on our debt service requirements, and his administration is entitled to defend its opinion,” Nappier said Tuesday. “My objective is to have a constructive dialogue on how we can best resolve our differences, and that’s what I’m committed to do.”

The miscalculation of the spending cap — and, if Nappier is correct, debt service — has Republican lawmakers saying, “I told you so.”

“We knew immediately after receiving it that it was actually over the cap and now, by OPM’s secretary’s own admission, the cap has been exceeded by $54 million,” Senate Republican leader Len Fasano said.

He said that and all the other budget gimmicks in the budget, such as the diversion of about $47 million that should be used to pay down borrowing to transition to Generally Accepted Accounting Principles, means it’s about $101 million over the spending cap. That means lawmakers will have to find another $101 million to cut.

“The spending cap was overwhelmingly ratified by the state taxpayers to prevent against spending growth that is above what they can afford,” Fasano said. “If this isn’t a red flag, I don’t know what is. The state has a substantial spending problem.”