Even under executive order, state to end year in deficit

HARTFORD — In the absence of a state budget for 2018, Connecticut remains on track to end the year with a $93.9 million deficit, according to state Comptroller Kevin Lembo.

Gov. Dannel P. Malloy is currently operating the state under an executive order, which means he has a limited amount of money he can spend and he has no ability to raise taxes.

Lembo said Malloy’s spending authority should allow him to meet certain savings targets, but spending trends so far are 7.2 percent higher than the same period last fiscal year and show that fixed costs, including debt, state employee and teachers retirement and retiree health care, continue to rise, as discretionary spending is decreasing.

“The state’s municipalities, nonprofits and Connecticut residents, including the most vulnerable, depend on discretionary program spending for critical services and to enhance the quality of life,” Lembo said.

Programs that fund things like substance abuse services, mental health care, early childhood education, and home care for the elderly and disabled have faced significant cuts as a result.

According to the Connecticut Community Nonprofit Alliance, at least one nonprofit has closed its doors as a result of the elimination of state funding.

StreetSafe, a community-based nonprofit program in Bridgeport that has helped more than 300 at-risk youths turn their lives around, will close its doors Oct. 1. It’s perhaps the first, but not the last casualty of the state budget impasse.

The House declined Tuesday to override Malloy’s veto of a Republican budget that was passed with the help of eight Democratic legislators in midSeptember. Malloy and legislative leaders will continue their closed door budget meetings Thursday.

Following Tuesday’s brief budget negotiation, Malloy reiterated his desire to get a budget passed before Oct. 13.

Lembo said the provisions of SEBAC 2017, which saved the state $1.57 billion over two years, will start to mitigate the costs as the year progresses, but it will require close monitoring.

In his letter to Malloy, Lembo explained that debt service payments were up $139.1 million from last year through August, and contributions to the Teachers Retirement Fund increased by $69.6 million.

“The combination of rising retirement health costs, higher contributions for state employee retirement, and the new state employer matching contribution for other post-employment benefits all factored into this growth, adding an additional $41.3 million over last year,” Lembo wrote.

The Office of Policy and Management says it plans to transfer $94.5 million in unspent funds from the Municipal Revenue Sharing Account to cover any budget shortfall. That transfer requires legislative approval.

“As you note in your executive order, the state’s capacity to meet its spending obligations is impaired by the inability to enact a budget that provides for policy changes that increase revenue,” Lembo wrote. “This problem is exacerbated each month as potential sources of additional revenue are foregone due to the absence of the necessary changes to the revenue structure.”

Even things that both parties agree to, such as a hospital tax that would generate higher federal reimbursements, hasn’t gotten over the finish line. The parties involved in those negotiations are expected to meet later today.

“Moreover, ongoing budget uncertainty will slow Connecticut’s economic growth and could ultimately lead to the state and its municipalities receiving downgrades in credit ratings that will cost taxpayers even more,” Lembo added.

Lembo pointed out that the economy continues to post mixed results, which indicates Connecticut cannot grow its way out of the current “revenue stagnation, especially in light of the state missing its revenue targets in the last two fiscal years.”

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