State To Chop $103 Million In Spending To Avoid Potential Deficit [Courant.com]

Article as it appeared on Courant.com

RTFORD – Scared by stock market downturns and low tax revenue projections, Gov. Dannel Malloy’s administration announced $103 million in new budget cuts Friday, including $63.4 million in reduced Medicaid payments to hospitals.

“It’s the change in the stock market that’s driving our concerns,” said Malloy’s top budget aide, Benjamin Barnes. He said in a letter to the state Comptroller’s Office that, “due to recent volatility in the stock market, our revenue estimate has been revised downward by $96.1 million.”

The 2015-16 budget passed a few months ago assumed there would be a 7.1 percent growth in state revenues, but Barnes said the recent losses in the stock market are expected to cut into state income and corporate tax revenues. The new Malloy administration estimate is that state revenue growth will only be 4.4 percent.

In an unlikely turn, Malloy’s plan drew praise from at least one Republican and scorn from his fellow Democrats.

“I’m disappointed and certainly opposed to what appear to be cuts targeting some of the very areas we sought to protect in the budget,” Democratic House Speaker Brendan Sharkey said. “Under our budget agreement, the bipartisan MORE Commission was charged with identifying additional municipal savings, and they haven’t been given the opportunity to do so yet. We also agreed to restore hospital funding the governor proposed to cut, and so these renewed cuts will very likely impact the delivery of healthcare services. Though the governor has the authority to make these cuts at this time, the legislature will continue to monitor the status of the budget, and look to mitigate these cuts next session.”

The state Senate’s top Democratic leader, Martin M. Looney of New Haven, said he understands the governor’s “concerns about the U.S. stock market performance over the past several months and its impact on Connecticut’s projected revenue collections.”

“The intent of our budget was to achieve cost savings on the municipal level through greater cost sharing and efficiencies,” Looney said in a prepared statement. “I would emphasize that nothing announced today in any way decreases our commitment to increase funding to cities and towns so that residents throughout Connecticut will realize significant property tax relief. To that end, I look forward to the release of specific, cost-saving municipal efficiency recommendations [from a state task force] to help mitigate some of these line-item cuts.”-

At least one Republican cheered Malloy’s move. “I am glad the Gov. is taking this action (cutting the budget) now, as it is the prudent thing to do,” Rep. Melissa Ziobron, a Republican from East Haddam and a ranking member on the legislature’s appropriations committee said in a Facebook post . “This is EXACTLY what my caucus had asked be done early on in the LAST session. It’s time we live within our means.”

But not all Republicans are supportive.

Senate Minority Leader Len Fasano issued a scathing statement denouncing Malloy’s budget cuts as “a disaster.”

“When is Connecticut’s Democrat leadership going to step up and do the right thing?” asked Fasano, R-North Haven. “This is already a disaster, and we are only three months into the budget year. What does Gov. Malloy expect to do every month – make painful cuts to social services, to children’s programs and to hospitals? He calls that a strategy?

“Our hospitals are laying off workers and failing left and right, yet they will face a major cut? How will that improve services for the sickest among us? Anyone who cares about children, about health care, and about services for our most vulnerable residents should be shouting from the rooftops,” he said.

Fasano is calling on the legislature to convene in special session next week to address this budget. “What are Democrats waiting for? Are we just going to let the governor make 5 % cuts to social services every month like he did last fiscal year?” he asked.

“The state budget that Democrats passed this year already caused terrible pain for Connecticut’s disabled and frail residents by cutting funding for social services,” Fasano added. “Time and again, month after month, Republicans urged the governor and legislative Democrats to show fiscal leadership. They ignored us.

“Now, they own this budget, and it is a proven failure,” he said. “This is what happens when you have one-party rule in government, and I hope the taxpayers of Connecticut are as outraged as I am.”

Barnes estimated that the $63.4 million cut in state Medicaid payments to hospitals represents about a “40 percent cut in net operating profits” of Connecticut hospitals. But he added: “Obviously their profits have been growing.”

The Connecticut Hospital Association predicted the cuts would have a devastating impact on patients who rely on Medicaid.

“We are outraged that the Governor would slash Medicaid funding that is desperately needed to care for the most vulnerable people in our state,” the group said in a statement. “With nearly one in five Connecticut residents on Medicaid, withdrawing even more funding from the state’s obligation is outrageous. It puts a tremendous additional strain on healthcare providers, who already provide services with reimbursement that is nowhere near the actual cost of delivering that care.”

The association is calling on legislators to intervene. “Sweeping cuts to this vital program will hurt patients and their communities, and further cripple our state’s economy.”

Jennifer Jackson, CEO of the Connecticut Hospital Association, predicted that Malloy’s cuts could result in layoffs at some local hospitals. “We’re sensitive to the fact that there’s a budget [shortfall] in the state but cutting funding to hospitals is not the way to address it,” Jackson said.

Hospitals are a major driver of the state’s economy; the cuts will have a significant impact, she said. But even more important, she added, is the impact the reductions will have on patient care.

Barnes, Malloy and others have repeatedly criticized hospitals, noting that some institutions are flush with cash and offer their top executives lavish compensation plans.

“It is true that some hospitals have a positive margin but that’s absolutely what this state and this economy need,” Jackson said. “We have to have money to invest in technology and medical care.”

This isn’t the first time the state has cut reimbursements to hospitals. “This has become a pattern,” Jackson said. “The impact is a decrease in access, whether it’s fewer programs or…closed locations.”

The biggest cuts to state agency budgets will hit the Department of Mental Health and Addiction Services, with an $8.4 million reduction, and the Department of Developmental Services, which will lose almost $7.6 million this fiscal year.

Malloy cut a total of $4.3 million from three key programs at the Department of Developmental Services — $3 million from employment opportunities and day services for adults with intellectual disabilities; $1. 8 million from funding for private operators of group homes for adults, and just shy of $300,000 for in-home services for children with intellectual and behavioral disabilities.

The Courant reported last Sunday that DDS, with a billion-dollar budget, paid $48 million in overtime alone to state workers at institutions, with nearly 200 workers earning at least $50,000 in overtime on top of base salaries, and 14 workers earning over $100,000 in overtime.

“Any cuts to the budget for families and individuals without the governor taking a hard look at the overtime account is extremely problematic,” said Leslie Simoes, executive director of The Arc Connecticut, the state’s largest coalition of advocacy groups for people with developmental disabilities.

Working with the Arc, a group of parents has done two reports on overtime expenses and has demonstrated that millions of dollars can be shifted from the overtime account without a single state worker losing his or her job. Overtime expenses are rising even as the institutional population is dropping. There are more than 2,000 families waiting for openings in private group homes or apartments. but DDS has said there is no funding available.

Private providers have not had funding increases for seven years.

The governor also cut $5.9 million earmarked for mental-health, drug-abuse and discharge and diversion services at the Department of Mental Health and Addiction Services. In February, the Sandy Hook Advisory Commission recommended expanding mental-health services in schools and communities to better recognize and treat mental illness.

The commission was formed by Malloy after 20 students and six educators were murdered at Sandy Hook Elementary School on Dec. 14, 2012. None of the panel’s recommendations have been funded, and the cuts announced Thursday reduce basic mental-health services in the state.

“We are extremely disappointed in the rescissions put forth by Gov. Malloy this morning,’’ said Kate Mattias, executive director of the mental-health advocacy group NAMI – Connecticut.

“The cuts to social and human services and supports … are both ill-conceived and ill-timed. Cutting community-based, critical mental health and addiction services now will only cost us more down the line as people who are unable to get services, will require expensive emergency care, or may not seek care at all,” Mattias said. “This will only result in our neighbors, friends, colleagues and family members getting less well and requiring more intensive services, costing individuals more in their health and the state more in services.”

Jeffrey Walter, interim CEO of Connecticut Community Providers Association, issued a statement warning that, “Governor Malloy’s plan to cut $4.7 million from substance abuse and mental health programs, and more than $5 million from programs for people with developmental disabilities will be a devastating blow to thousands of individuals and families receiving vital community-based services.”

“Community providers have consistently delivered the most cost effective services, while absorbing repeated budget reductions. Further cuts to life sustaining services will put many of Connecticut’s most vulnerable citizens in peril and destabilize human service organizations.

“The need for community services has not changed since spring, when hundreds of clients, family and providers came to the Capitol and asked lawmakers to reject massive cuts in funding, and supported the need to increase taxes,” Walter said. “In its final budget vote in June, the legislature and the Governor recognized the need for community services, and passed a budget that limited cuts and increased taxes. The rescissions announced today will undo many of those gains.”

Other agencies that will see significant spending cuts include:

$3.5 million from the budget for technical colleges and the state university system.
$3.5 million from the state Department of Housing.
$2.4 million from the state Department of Education, including a $1.4 million reduction on spending on vocational-technical schools.
$2.4 million from the University of Connecticut.
$1.4 million from the University of Connecticut Health Center.
Connecticut’s governor has authority to cut up to 5 percent of the amount allocated to individual state agencies under a budget that wins legislative approval.

Barnes defended the original 7.1 percent estimate of state revenue growth, calling it “a conservative estimate of a positive growth year.” He said his fiscal experts now believe there is “a significant possibility we will have a negative growth year.”

“There is greater uncertainty today,” Barnes said, than there was back in April and May when the 2015-16 budget was being negotiated with the General Assembly’s Democratic majority.

“Everybody’s belief that we would be returning to a regular business cycle has faded,” said Barnes, adding that he and state economists now believe the economic recovery “will continue at a slower pace… That it will be a protracted, slow recovery.”

The new two-year $40 billion-plus state budget plan also assumed that there would be an overall $20 million cuts this year in state aid to municipalities, but cities and towns didn’t know exactly how much each municipality would lose.

Barnes, who is secretary of Malloy’s Office of Policy and Management, also released detailed figures on exactly how much each of Connecticut’s cities and towns would see cut from their state aid. He said the cuts are based on a sliding scale, with wealthy towns seeing bigger percentage reductions and poorer towns seeing less.

Hartford, for example, will see a $400,000 reduction in state aid this fiscal year, while Greenwich will lose nearly $883,000.

The Connecticut Conference of Municipalities, which lobbies on behalf of the state’s 169 cities and towns, questioned the timing of the reductions.

“These cuts, while included in the state budget, still represent a breach in the state-local funding arrangement in the middle of the fiscal year, after local budgets have been set, and would adversely affect some of our neediest communities,” said Executive Director Joe DeLong.

Malloy administration officials say the cuts will be offset by more regional cooperation and greater governmental efficiencies, as proposed by the MORE Commission, a legislative panel looking at streamlining local government. But DeLong noted that most of those changes have yet to be enacted.

“The MORE commission has not created, enacted or provided for any specific set of efficiencies that towns can immediately use that will make up dollar-for dollar for these aid cuts,” he said.