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Gov. Rell To Use Reserve Money To Help Offset State Budget Deficit

By CHRISTOPHER KEATING

March 02, 2010

Gov. M. Jodi Rell plans to use $219 million in reserves tagged for next year's budget to help plug a projected deficit of $504 million in this year's.

The money, from the so-called rainy day fund, is the single biggest shift of funds in a proposal, released Monday, that also calls for $82 million in spending cuts this year and a combination of accounting moves and fund transfers to erase the deficit for the year ending June 30.

The state's dire fiscal situation is prompting Rell to propose using the $219 million from the budget reserve this year instead of next. The switch would create a hole for fiscal 2011 that would need to be filled, and Rell proposed further spending cuts and other moves to do that.

The rainy day fund had initially been allocated to fill budget holes in three fiscal years, and $342 million from the fund had been set aside for fiscal 2011.

In addition to the rainy-day money and the spending cuts, the governor's plan to erase this year's deficit depends on these dollars:

•$58 million in various fund transfers.

•$45 million in federal stimulus money.

•$100 million by delaying a payment into the state employees' pension fund, although that money would need to be paid in the future because the pensions are guaranteed by labor contracts. Despite the delay in payment, no one's pension would be reduced or changed.

"This deficit must be eliminated now through swift and decisive action. We cannot afford to wait and hope or to count on future revenues that no one is certain we will collect," Rell said in a statement. "The plan I am proposing not only eliminates the current deficit but makes much-needed structural reforms that will improve our prospects for long-term recovery. If we do not act now, any short-term cuts we manage to make will be overwhelmed by the inexorable growth of state spending."

She added, "These choices may not be easy, but they are necessary. These choices may not be pleasant, but they are crucial. These choices may not be politically popular, but they are the right choices to make."

Rell's spokesman, Rich Harris, said the structural reforms include a broad range of issues, including postponing the in-school suspension requirement and enacting mandate relief that would help all cities and towns.

Rell's plan is subject to approval by the Democrat-controlled legislature, which has rejected most of Rell's proposed budget cuts over the past year.

The bitter standoff led to the longest budget stalemate in state history, but Rell allowed it to become law in September without her signature. The state was into the third month of the current fiscal year before the budget became law.

Democrats say the budget deficit would be smaller today if Rell had not vetoed two bills that they had passed before Christmas in an attempt to close the gap. One of those bills involved delaying changes to the estate tax, which is paid by the state's richest families. Based on the changes this year, anyone who dies with less than $3.5 million is not subject to the estate tax. That number is an increase from the previous threshold of $2 million, and House Speaker Christopher Donovan said in a recent interview that the delay of the estate tax must be on the table again this year.

Rell rejected the bills late last year, and Democrats could not generate enough votes to override the vetoes.

Many of Rell's proposed changes in the Department of Social Services budget are cuts or Medicaid savings that had been previously mentioned in her prior budgets.

Rell, for example, is calling for suspending non-emergency dental services for adults under Medicaid and general assistance welfare, which would save $1.8 million in the current fiscal year and $22.4 million in the fiscal year that starts on July 1.

"The review of the budget mitigation plan will begin immediately," said Senate President Pro Tem Donald Williams, the highest-ranking senator. "One thing remains clear: Real spending cuts will be necessary to help balance the budget. It is also critical that we take action to grow and protect jobs — something that has a direct impact on tax revenues and the deficit."