Sen. Harding Warns: CT Democrats on “a path to dismantling our fiscal guardrails”

September 25, 2024

AG: CT legislature didn’t violate law by not adjusting budget

Key accounts in plan were hundreds of millions of dollars out of balance

by Keith M. Phaneuf

September 24, 2024 @ 4:57 pm

The General Assembly did not violate Connecticut law when it declined last May to revise the state budget despite warnings that key accounts likely were hundreds of millions of dollars out of balance, Attorney General William Tong said Tuesday.

But House Republican leader Vincent J. Candelora of North Branford, who, along with Senate Minority Leader Stephen Harding, R-Brookfield, requested the opinion, said the Democratic-controlled legislature’s actions created risks on two levels.

The financial cushion built into the budget has eroded quickly since the fiscal year began July 1, from $298 million to $109 million, according to Gov. Ned Lamont’s budget office.

And the majority’s actions also established a dangerous precedent, opening the door for future legislatures to violate the spirit — if not the letter — of a constitutional provision mandating a balanced budget, the House GOP leader added.

“The General Assembly — subject to the Governor’s veto — is empowered to decide both the process and substance of Connecticut’s budget,” Tong wrote Tuesday to Candelora and Harding. “Your letters express concern that the General Assembly altered the ‘normal process’ of estimating revenue and adjusting the budget in even-numbered years. But the budget process — ‘normal’ or not — can be changed by the General Assembly.”

At issue is the Democratic legislators’ decision to close the regular 2024 session on May 8 without having formally adjusted the preliminary $26 billion budget they and Lamont had approved 11 months prior for the 2024-25 fiscal year.

Traditionally, legislators have revised these early-draft budgets shortly before they take effect, because spending needs normally change over time.

Further complicating matters, Lamont had warned his fellow Democrats that this budget short-changed required contributions to retirement benefit programs by more than $150 million. And the Department of Social Services’ Medicaid account, which covers the bulk of state spending in this federal program, was reporting $165 million in cost overruns last April with just two months left in the 2023-24 fiscal year. The preliminary budget for 2024-25 had planned for less than 60% of that growth.

Connecticut had more than enough funds to cover those costs. Besides the $298 million operating surplus built into the preliminary budget for 2023-24, another program that reserves income and business tax receipts to pay down pension debt is slated to capture more than $1.3 billion this fiscal year.

But to use that money, legislators would have had to revise the state spending cap and other controversial fiscal controls that, since 2017, have forced state government to save more than $12 billion to place in reserve or to pay down pension debt.

This would have put Democratic lawmakers at odds with Lamont, who has staunchly opposed any direct changes to this system.

Connecticut still had about $370 million in soon-to-expire federal pandemic grants that legislators could have used to cover these retirement benefit and Medicaid shortfalls.

But instead, they took advantage of a technicality that allows them to spend those funds outside of budget constraints and dedicated those dollars to higher education, social services, child care and children’s mental health.

Still, Tong, a Democrat, noted the preliminary budget for 2024-25 was balanced when legislators and Lamont approved it in June 2023.

And there is no legal requirement that it be revised shortly before it takes effect.

GOP leaders also had argued that the assignment of federal pandemic grants and other last-minute policy changes the legislature made triggered a legal requirement that legislators adopt revised revenue estimates before they adjourned in May. They did not.

But Tong wrote that legislators effectively suspended that requirement when they assigned the pandemic grants without adopting a new revenue schedule.

That bill “superseded and supplanted any conflicting prior legislation,” the attorney general wrote.

Still, Republican leaders predicted these budget maneuvers would quickly whittle down the fiscal safety nets created to avoid deficits and to reduce debt, effectively shifting those dollars to other programs.

And Candelora said Tuesday those cushions are evaporating as quickly as expected, adding that no one is sure how far the damage goes.

“While the attorney general may have found they have not violated the law, the practices they partook in have created a very flimsy and fiscally unstable budget,” he said, adding he fears future legislatures may undermine these budget controls in similar fashion to avoid making difficult spending cuts.

“I think we are in completely uncharted waters,” he said, “and Connecticut taxpayers are going to pay for it.”

Harding said, “It starts Connecticut down a path to dismantling our fiscal guardrails — the responsible spending guardrails that Republicans fought for and got passed” in 2017, when the GOP controlled half of the Senate’s 36 seats. “It starts us down the road of not abiding by our constitutional duty as lawmakers, and I am very concerned that we won’t be able to put those pieces together again.”

Democrats counter that these budget controls badly need revision and are saving excessively to cover pension debt at the expense of education, health care, social services and other core programs.

“I adhere to the advice of the Attorney General’s Office, and I am sure others will as well,” House Speaker Matt Ritter, D-Hartford, said Tuesday. “Bottom line — there was no violation of the state Constitution or any other statute, and that’s what we thought would be the answer.”

Senate President Pro Tem Martin M. Looney, D-New Haven, said the majority caucuses were and remain confident they exercised “legitimate budget powers” last May. “We reasoned exactly the way the AG did.”

And Looney noted those budget controls have increasingly become a challenge for all parties.

Republican legislators last month proposed redirecting a portion of last fiscal year’s surplus, which is supposed to be used to build budget reserves, to reduce rising electric rates.

Reexamining those savings programs “has got to be one of the main centerpieces of the 2025 session” that starts on Jan. 8, he added.

https://ctmirror.org/2024/09/24/ct-balanced-budget-law-attorney-general/