Malloy orders $102 Million budget cuts due to lower capital gains projections [FoxCT]

Article and video as it appeared on FoxCT.com

HARTFORD – Gov. Dan Malloy has ordered cuts totaling $102 million in response to volatility in the stock markets and the possibility of decreased revenue from capital gains taxes.

While Malloy acknowledges there is a chance the stock market, which is down about 800 points in two months, will recover before year’s end, he says he won’t bet on it “because about $3.7 billion of our revenue is in some way tied to the economic markets or the commercial markets.”

“I think his reaction to the stock market is a little premature,” said Cindy Ault of Greenwich. “I think you have to ride these things out, the waves, the up-and-down. You just can’t react in any kind of dramatic fashion.”

The cuts for executive branch agencies, under the governor’s authority, total $99.2 million. Malloy has asked legislative leaders and the judicial branch to reduce spending by about 0.5 percent.

“OPM’s estimate of capital gains has decreased for the current fiscal year, and it would be reckless to expect these revenues to grow when the S&P 500 is down more than 6 percent since May. Only once since 1994 have we seen positive capital gains revenue growth when the market was down. Conversely, five times in the last 20 years a down market has led to significant revenue drops. That’s why we’re taking these smart, strategic, proactive steps,” the Office of Policy and Management Secretary Ben Barnes said in a statement.

Taking the largest budget hit: Medicaid, which nearly one in five state residents rely on. That reimbursement will be cut by nearly $64 million. But, Malloy says hospitals are coming off of a record year.

Malloy said the hospital’s revenue of “6.5 percent is pretty darn good,” adding that those numbers rival “what Aetna’s doing.”

“We are in a large deficit and wherever he’s gone out and found a place to cut the budget I think it’s important and that it needs to be done,” said Mark Winik of Branford.

Instead of these cuts, the top Senate Republican says the state needs to get control of overtime wages.

“Just recently, there was an article about an employee, whose base pay was $50,000, who tripled his pay with overtime,” said Len Fasano, the state Senate minority leader.

The Courant reported last Sunday that the Department of Developmental Services paid $48 million in overtime last year. That department is expected to see about $7.5 million cut from its budget, most of which will come from employment opportunities, day services and community day services.

Fasano says Republicans presented the governor with a budget last year that included $200 million in overtime savings.

“In addition to that, what you need to do is that with pensions, overtime is included in your pension and we need to stop that,” said Fasano.

Malloy said the budget cuts won’t cost any state jobs or funding for local education.

However, a release from the Office of Policy and Management notes the state department of education is being stripped of $2.5 million, $1.4 million of which was earmarked for vocational-technical schools.

Also, the Board of Regents is projected to have $3.5 million in cuts, the majority of which come from the Connecticut State University and Community and Technical colleges. UConn is facing $2.6 million in cuts from both the school and the Health Center budgets.

The governor has the authority to cut up to five percent of the budget from any line item. Fasano is calling for a special legislative session in the next week or two.

Other departments that will see significant cuts include the Department of Mental Health And Addiction services, which will see $8.4 million in cuts, nearly half of which come from grants for mental health services.