Miscalculation Puts Governor’s Budget $55 Million Over State’s Spending Cap [Courant]

February 25, 2015

Article as it Appeared in the Hartford Courant

HARTFORD — Due to a miscalculation, Gov. Dannel P. Malloy’s proposed budget is now $54.5 million over the state’s spending cap for the next fiscal year.

Malloy’s budget office said Tuesday it is changing its calculation of the cap, which means the state will have less money to spend than than expected in the next fiscal year.

Budget director Ben Barnes said the problem arose from a miscalculation in the growth of personal income, a key figure used to calculate the size of the statutory spending cap each year.

During recessions and slow-growth years, growth in personal income is normally low, thus lowering the spending cap.

“The discrepancy occurred when data was pulled from an outside vendor in January 2015,” Barnes said in a statement from the state Office of Policy and Management. “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.”

The vendor was IHS Global Inc., of Englewood, Colo., which the administration says was paid $41,000 to provide economic forecasting used to help produce Malloy’s revenue forecast.

Under Malloy’s original estimates, the proposed budget was $6.3 million under the spending cap for the fiscal year that starts on July 1 and $135.8 million under the cap for the 2017 fiscal year.

Now, proposed spending is $54.5 million above the cap next year and $80 million under the cap in the second year of the two-year budget.

Republicans expressed concern.

“An ugly budget just got uglier with this disclosure that the governor’s proposal is actually over the Constitutional spending cap by $54 million due to errors in income growth assumptions,” said House Republican leader Themis Klarides. “All of our jobs just got harder. As it stands now, the legislature could not vote on this budget because it exceeds the cap. The question is, does the governor reconcile this issue before we move forward with our budget deliberations?”

Senate Republican leader Len Fasano said: “The governor has sold his budget as being under the state’s spending cap. 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. This, coupled with the $47 million spending cap gimmick exposed in the appropriations committee meeting by Senator Kane last week, results in the budget presented by the governor being over the cap by $101 million.”

Kane was referring to the state’s switchover to Generally Accepted Accounting Principles, which would cost about $47 million per year.

Fasano referred to a vote on a constitutional amendment in November 1992 when he said, “The spending cap was overwhelmingly ratified by the state taxpayers to prevent against spending growth that is above what they can afford. If this isn’t a red flag, I don’t know what is. The state has a substantial spending problem.

“This same budget also raises taxes on individuals by over $103 million. Clearly, our spending cap cannot support this level of additional spending.”

Barnes told the legislature’s nonpartisan fiscal office the details of the spending changes for the next two fiscal years.