Gov. Dannel P. Malloy Wednesday ordered immediate state cuts and called for withholding local aid along with tapping all of the state’s rainy day fund in an attempt to close an estimated $390 million budget gap in the current fiscal year.
Malloy is acting because the state is suffering from sharp declines in income tax collections and a growing budget deficit. He told legislators that “our constituents, our taxpayers, our creditors, and our employees all expect” the state will act decisively to eliminate escalating budget deficits, including a shortfall of $2 billion forecast for next year.
The governor’s plan will empty virtually all of the state’s budget reserve fund of $235.6 million. The changes include $33.5 million in Malloy-ordered budget and $22.6 million in financial moves that would require legislative approval.
Most of Malloy’s deficit mitigation plan, including draining the rainy day fund, does not require approval from the General Assembly. Lawmakers would need to vote on Malloy’s plan to withhold $19.3 million in combined state aid to all 169 cities and towns, which represents the June payment of the Pequot Fund that covers revenue-sharing from casino slot machines.
Other changes include $99.5 million in revenue transfers, which includes sweeping money that is remaining in more than 50 accounts across state government and placing that money into the general fund to balance the budget.
That also includes taking $14 million from the state attorney general’s settlement with Volkswagen and counting that money toward the current fiscal year.
“My overriding goal is to solve this fiscal year’s potential shortfall without engaging in deficit borrowing, particularly since the economic recovery notes from the 2009 deficit will not be fully repaid until next year,” Malloy said in a letter Wednesday to legislative leaders.
Republicans and Democrats want to avoid borrowing money for operating expenses, which they say is a bad fiscal idea that could affect the state’s bond rating. The state borrowed money for such purposes in 2009 but has avoided that consequence in recent years.
The cuts must be made quickly because the savings must be completed by the end of the fiscal year on June 30.
The Connecticut Conference of Municipalities blasted the proposal to withhold payments to towns as among the “same tired approaches” that have been used in the past. The reductions include $2.08 million for Hartford, $1.97 million for Bridgeport, and less than $6,400 for Avon, among others.
Joe DeLong, CCM’s executive director, said that “rescinding payments to cities and towns is just more of the same. It’s time our state policy makers stop shoving their problems onto property taxpayers and start doing things a different way.”
He added, “This situation is yet another of what has become a constant reminder of the need for comprehensive reforms.”
The money from Volkswagen is part of the German carmaker’s settlement due to a major emissions cheating scandal. Connecticut received $16 million last June, and additional payments are designed to pay for air pollution reduction projects, such as upgrading engines on trucks, bulldozers, buses and marine equipment. Both government and nongovernment groups will have the chance to seek funding under that program in order to remove tons of air pollutants.
The $14 million transfer will include money received from Volkswagen before Aug. 1, and it will be applied to the fiscal year ending June 30. Connecticut Attorney General George Jepsen was involved in the negotiations as more than 40 states are receiving money from the settlement.
After all the moves and cuts of $2 million for hospitals, the state would end the fiscal year with an estimated general fund surplus of $1.3 million — essentially a break-even budget.
“We need additional time to digest the deficit mitigation plan presented by Gov. Malloy,” said House Republican Leader Themis Klarides of Derby. “These proposed cuts have significant ramifications for many programs and services. There are just six weeks left in the fiscal year, and we are at the same time formulating our budget for the next two years.”
Malloy’s plan calls for more than $1 million in immediate spending cuts at the state Department of Energy and Environmental Protection, and more than $7.7 million in transfers from DEEP funds and accounts to help solve the deficit crisis.
Department spokesman Dennis Schain said the reductions “continue to build pressure” on state parks already under stress from past budget problems and that Connecticut residents can expect to see some cuts in maintenance and repairs at parks. But he said no major maintenance issues should result from the new cuts.
“It is a relatively small amount per park,” Schain said.
The $1 million-plus in money being transferred out of the park system is coming largely from special accounts for each park that is funded by rental fees for pavilions and shelters that are used to pay for maintenance and repair protects. The largest single fund sweep is $500,000 being taken from Harkness Memorial State Park. The Harkness facilities are extremely popular as wedding venues, and Schain said only about half the money in that fund is being taken to help with the deficit.
Malloy’s plan will also take $4.5 million from the Community Investment Account fund that is used for purchases of open space, farmland preservation and cultural grants.
Schain said the effort to reduce the department’s spending even further will be helped by about 50 recent retirements.
“We are deeply disappointed to see the proposed raid of over $1.5 million in funds raised through entrepreneurial activities undertaken over several years by several state parks,” said Eric Hammerling, executive director of the Connecticut Forest & Park Association. “These funds were supposed to be dedicated to the maintenance, repair and improvement of the state parks where these funds were raised, and we hope the General Assembly won’t go along with it.”
“The closure of several campgrounds and the cutback of services at the state parks was already a tragic but foregone conclusion. If this proposal is adopted by the legislature, things will get even worse for the parks and campgrounds, and it will be even harder for DEEP to staff-up with seasonal workers to meet the needs of 8 million visitors each year who still want to visit,” Hammerling said.
Malloy’s deficit reduction plan is also calling for $21 million in cuts in the judicial department. Agency spokeswoman Rhonda Hebert said in an email that the vast majority of that money will come from “almost $18 million … associated with collective bargaining increases that will not be expended this year.”
Other savings will result “from staff continuing to leave the [judicial] branch and not being replaced,” Hebert said.
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