Sen. Kane: “It went from a $300,000 surplus to a $100 million deficit in one month?” (CT Mirror)

November 24, 2014

The legislature’s two budget-writing panels grilled Gov. Dannel P. Malloy’s fiscal staff Friday about the new state deficit – and the administration’s latest cuts to reduce it.

Republican legislators focused, as expected, on why the $99 million shortfall Malloy reported last week wasn’t acknowledged before Election Day. And while the governor’s fellow Democrats tried to see the positive trends in state finances, some voiced modest concerns with new cuts to social service programs.

The governor’s budget staff and the legislature’s nonpartisan Office of Fiscal Analysis met with the Appropriations and Finance, Revenue & Bonding committees to review their respective Fiscal Accountability reports – detailed analyses of long- and short-term budget trends.

“It went from a $300,000 surplus (two weeks before Election Day) to a $100 million deficit in one month?” Sen. Robert Kane of Watertown, the ranking GOP senator on the Appropriations Committee, asked Karen Buffkin, the governor’s deputy budget director.

“The economy continues to improve, and we continue to meet the challenges we have,” Buffkin said, noting that the $100 million forecast is a prediction of how the state’s books would close on June 30 – if no corrective measures were taken.

The administration already has ordered $48 million in emergency spending cuts, asking the Legislative and Judicial branches and the state’s watchdog agencies to volunteer another $7 million in reductions. The administration also has restricted hiring, contracting and other purchasing, she said.

The budget-balancing effort “has already begun,” Buffkin added. “We expect to end the fiscal year in balance.”

“Why are we experiencing this gap if things are going well?” asked Rep. Arthur J. O’Neill, R-Southbury. “When things are going well you usually have surpluses, not deficits.”

Besides the deficit projection in the current budget, a much larger shortfall is forecast for the 2015-16 fiscal year. Nonpartisan analysts are estimating a $1.3 billion shortfall, or about 7 percent of annual operating expenses.

“Where is the disconnect?” added Sen. L. Scott Frantz, R-Greenwich, the ranking GOP senator on the finance panel. “What is it about state government that is so expensive?”

The governor’s fellow Democrats on the budget panels urged their GOP colleagues to keep some perspective on the shortfall.

Sen. John Fonfara, D-Hartford, co-chairman of the finance committee, urged legislators to remember that this year’s deficit represents less than three-quarters of 1 percent of the general fund.

“We are not in the worst place,” he said. “I think most people would feel like that’s not bad five months . . . into the fiscal year.”

And despite the deficit, there are some positive economic signs, such as sales tax receipts running $50 million above the level built into the budget,” added Rep. Patricia Widlitz, D-Guilford, the other co-chair of the finance committee.

“The good news is the activity is out there,” she said.

Still, Democrats did express some concerns about the emergency cuts Malloy ordered, particularly given that more than $20 million were aimed at social service agencies.

Rep. Toni Walker of New Haven and Sen. Beth Bye of West Hartford, co-chairwomen of the Appropriations Committee, urged the administration to keep a close watch on cuts affecting community-based behavioral health programs for abused children.

“We both are trying to address our fears, so we ask that these reductions be reviewed a little bit better,” Walker said, adding that, “We are cutting things that really are dangerous.”

By law, the governor’s emergency cuts cannot reduce any program’s funding by more than 5 percent. And Bye cautioned anyone from assuming the small cuts ordered this week are a sign that the legislature will endorse larger reductions in these areas in June, when the next budget is adopted.

“No cuts to health services are pleasant cuts, and we are asking questions,” Bye said.

But she added there is a difference between the modest cost-cutting steps the governor has taken now and the task of preparing the next state budget.

The governor’s job now “is very different than the legislative process,” she said. “Government has some critical functions that it can’t always predict (the need for), but we have to provide.”