Sen. Kane to Malloy Administration: “The Budget Numbers Don’t Add Up”

February 19, 2015

A day after Gov. Dannel P. Malloy unveiled his budget proposal, Sen. Rob Kane (R-Watertown), revealed nearly $200 million worth of questionable fiscal methods which violate the state’s constitutional cap on spending and add to state debt.

“The budget numbers don’t add up – and we have evidence to prove it,” Sen. Kane said after questioning the governor’s budget chief during an Appropriations Committee hearing.

Sen. Kane, the committee’s lead Republican senator, noted that the governor’s budget evades the spending cap by diverting, rather than appropriating, $47.6 million. A state law passed in 2013 requires the appropriation of those funds in order to begin the state’s repayment of its accrued GAAP deficit.

Instead, that 2013 law was intentionally ignored. Rather than appropriating the money, the governor used a fiscal gimmick called a “revenue intercept”.

As a result of not appropriating these dollars, the state budget ends up $6.3 million under the spending cap.

“Not only is that not honest, it violates the spirit and the letter of the law we passed less than two years ago,” Sen. Kane said. “The governor intercepted it. He diverted it. Call it whatever you want, but did he really think we wouldn’t notice that he moved nearly $50 million off the books?”

Sen. Kane also highlighted a major discrepancy in the Debt Service portion of the governor’s budget. The governor’s proposal recommends $1.65 billion be allotted for debt service next year, while the Office of the Treasurer estimated that they were going to need $1.79 billion to fund our debt service obligations.

“Why the huge discrepancy?” Sen. Kane said. “That’s a nearly $143 million difference of opinion. How come the governor’s proposal is so far off from what our treasurer says we need? Are all of the professionals in Treasurer Nappier’s office wrong?”

Sen. Kane pressed the governor’s budget chief on possible motives behind the underestimating of debt service costs.

“This can’t just be a $143 million error,” Sen. Kane said. “This was done knowingly. We dug deep into this budget’s details and found it in less than a day. So why did they do it?”

Sen. Kane speculated that the governor’s underestimate would further assist the administration in another controversial state budget practice. When issuing debt in recent years, Gov. Malloy’s administration has increasingly opted to pay a higher interest rate than originally planned in return for extra money to support the state’s operating budget.

“Under that practice – that usage of bond premiums – Connecticut taxpayers essentially pay interest for their state government to operate government day-to-day,” Sen. Kane said. “An increasing percentage of our state budget already goes toward paying off debt. Are we going to continue to go down this wrong path?”

Sen. Kane noted that the Malloy administration has received approximately $400 million in bond premiums since taking office.

“This will result in potentially hundreds of millions of dollars of unnecessary interest costs for state taxpayers,” Sen. Kane said.