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Four Hundred Million Dollar Budget Deal

GOP Assails Using $320M In Surplus Funds To Bridge Gap

Christopher Keating and Jon Lender

May 28, 2011

In a last-minute announcement before the holiday weekend, Gov. Dannel P. Malloy's office announced a deal Friday night that uses $320 million in projected surplus money to help close the final gap in the state budget.

The agreement with top Democratic leaders would fill the remaining $400 million hole in the two-year budget by using both the surplus and about $80 million in cost savings.

Republicans immediately criticized the plan, saying that it lacked tough spending cuts, and the timing of its release, on the eve of the Memorial Day weekend.

"The Friday night dump. Is that what it's called?" asked House Republican leader Larry Cafero of Norwalk, who has emerged as one of Malloy's most outspoken critics. "This is the dump of all dumps. Friday night, holiday weekend. ... He drops the $400 million backfill plan."

Malloy has avoided using the word "surplus" in recent weeks and has repeatedly reminded reporters that the state should not be talking about surpluses at a time when it has huge unfunded liabilities.

When asked Friday night why the plan relies so much on the surplus, Malloy's budget director, Ben Barnes, said, "We relied on surplus - existing revenues that are already in the budget - because we thought that was the best solution" to balance the budget.

The plan calls for $52 million in savings from re-estimates of health care funding for retired state employees, along with more than $14 million in reductions in competitive grants for interdistrict public school programs that could include magnet schools. Malloy would also reduce the workers' compensation account by $7.3 million over two years and reduce inmate medical services by $2.5 million as the prison population continues to drop.

Republicans said that Malloy had pledged previously to close the gap with cuts, but Malloy's press office said that he never made that claim.

"He uses $320 million of the surplus to make up $400 million in cuts - $320 million!" Cafero said to reporters as he held up the latest plan. "Classic Malloy. He says one thing, he does the other. Says one thing, does the other. There isn't a real cut in this page, I don't believe."

Cafero added, "He makes a choice here, and it's a choice we knew he would make. He made a choice from the very beginning of when he introduced this budget. And that was: 'I'm going to hit up taxpayers first, with the highest tax increase in history, and I'm going to backfill the rest.' And that's what he's done."

In a conference call with reporters, Barnes called the comments "classic Cafero."

Both Cafero and Senate Republican leader John McKinney of Fairfield said that Malloy knew all along that he would not reach $2 billion in savings from the state employee unions and would need other money to fill the hole.

"This is the final nail in the coffin on what Gov. Malloy and his Plan B was all about," McKinney said. "His Plan B was about scaring people. His Plan B was the 'Andrew Cuomo envy budget.' It had nothing to do about what his real intentions ever were with respect to our state budget, even with a purported $400 million gap. And obviously that gap will be much larger. He will not achieve the concessions he said he will. But even with that, there are no cuts to spending here."

Barnes rejected the notion that Malloy had orchestrated "the fulfillment of a grand plan" from the beginning.

"I appreciate that Mr. Cafero knows my own mind and the mind of the governor better than we know ourselves," Barnes said.

The latest budget plan was e-mailed to reporters at 7:14 p.m. - at almost precisely the moment the Senate had finished voting on one of Malloy's bills after a seven-hour debate Friday. But Roy Occhiogrosso, Malloy's senior adviser, said that the release had "absolutely nothing to do with that at all" and that the simultaneous timing was "a coincidence."

The budget deal was announced because "this is when it was ready," Occhiogrosso said.

Malloy himself said that he would not go beyond the revenue increases that were approved previously by the legislature in the largest tax increase in state history.

In a statement, he said: "As promised, we've maintained our commitment to municipal aid, preserved the safety net and we have not asked for additional taxes. We are making additional spending cuts and using revenue that we otherwise would've put into the Rainy Day Fund. Let me be clear: The Rainy Day Fund will still receive funding, and we'll still pay down some debt."

Malloy has strong support from top Democratic leaders, and the final plan is expected to be approved before the legislative session ends June 8.

"Once again, Gov. Malloy has kept his promises," said House Speaker Christopher Donovan of Meriden.

Senate President Pro Tem Donald Williams of Brooklyn said, "The last piece of the puzzle is the $1.6 billion in savings and concessions from state employees. We encourage state employees to ratify the SEBAC agreement so we can avoid the draconian budget alternatives that would undermine Connecticut's economic recovery."