Millions of dollars more in budget cuts may be needed [WFSB]

October 19, 2015

WFSB

HARTFORD, CT (WFSB) – The governor’s office said the state may see more budget rescissions designed to take aim at a revenue shortfall.
Due partly because of stock market concerns, state officials released a list on Friday of more than $102 million in budget rescissions.
The Office of Policy and Management said Gov. Dannel Malloy took the steps to ensure the budget stays balanced.
The rescissions will affect Executive Branch agencies and the Judicial Branch.
The Executive Branch cuts total $99.2 million. Legislative leaders and the Judicial Branch have been asked to reduce spending by $420,000 and $3.1 million respectfully.
In addition, the OPM said it identified nearly $15 million in municipal aid reductions. Overall, however, it said municipal aid will continue to see an increase of 11.4 percent for the fiscal year 2016 budget over the fiscal year 2011 budget.
Rescissions will also affect the Connecticut State University System’s board of regents, Department of Agriculture, Department of Children and Families and others.
A complete list of the agencies and departments affected by the reductions can be found here.
The OPM said that it’s all due to the volatility on Wall Street and uncertainty about the future.
“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,” said Ben Barnes, OPM secretary. “Only once since 1994 have we seen positive capital gains revenue growth when the market was down.”
Barnes said that five times in the last 20 years a down market has led to significant revenue drops. That’s why he said they’re taking precautionary steps.
“While not everyone will be pleased with these decisions, this is the right thing to do to keep our state budget balanced,” he said.
According to projections from Comptroller Kevin Lembo, the state is looking at a $120 million revenue shortfall.
Gov. Dannel Malloy said he wants a bipartisan meeting to discuss the state’s short-term and long-term budget outlook.
“More hard decisions have to be made and I am here to say we should make them together with each party involved,” Malloy said.
Malloy said that with Wall Street on a significant downturn, further tough decisions need to be made. He added while unemployment is down, people are making less money.
“We’ve heard the calls and seen the press releases,” Malloy said. “Now we’ll have an opportunity for all of us to talk about specific, concrete ideas to move Connecticut forward.”
Revenue forecasts show a need for millions more in cuts following last month’s rescissions. The last round of cuts could affect hospitals and social services. Democratic leaders are proposing a 2.5 percent cut across the board.
Malloy said he encouraged leaders from both political parties to develop their own realistic and concrete proposals in order to be part of the solution.
“We should have a special session,” House Rep. Brendan Sharkey said. “I had previously not wanted to do one because it had not risen the level of the 1 percent.”
When the deficit is one percent of the general fund, the governor must have a mitigation plan, which basically means more cuts.
“Collaboration across branches, politics and agencies ensures that necessary spending cuts are made only after the most thoughtful and transparent process. As I reported earlier this month, spending cuts may be warranted – but the consequences of any cut should be vetted through a collaborative nonpartisan process to ensure that rescissions are carefully designed to solve, rather than create new, economic harm,” Lembo said.
Malloy said the state must use the economic reality of the moment to have a real discussion.
“It’s time for all of us to make tough decisions and make them together,” Malloy said.
Malloy and his office said the Republicans’ plan included labor concessions, which were unrealistic and came short of balancing the budget.
“He’s not calling anybody’s bluff. We know this governor,” state Sen. Len Fasano, who is the Republican minority leader, said. “If he felt strongly about something he would stay here. The bottom line is we have always been crystal clear. You want a conversation about numbers. Let’s have a conversation about numbers.”
Last month, Malloy announced more than $102 million in budget rescissions. The rescissions affected the Executive Branch agencies and the Judicial Branch.
The governor’s unusual gesture to include Republicans also comes when he’s losing ground among Connecticut voters. The latest Quinnipiac poll shows Malloy’s approval rating is at an all-time low.