January 7, 2016

The Good, the Bad, and the Ugly of special session

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On Dec. 8, the Connecticut legislature met to mitigate a projected deficit of about $252 million in the current fiscal year budget. The need for the special session was no surprise. Members of the Republican caucus, a handful of Democrats, and dozens of experts had warned that the budget passed in June was unsustainable.

Preceding the session there were bipartisan discussions to address the deficit, but the parties could not agree on long-term changes. Ultimately, the package that was passed found about $350 million in savings, much of it only temporary for the current fiscal year. I voted against the package for various reasons. There was some good, some bad, and some ugly in this budget “fix”.

The Good

An issue I have been fighting for over the past few months is the repeal of the propane tax for people who use propane for generators. Many constituents contacted me because they were being assessed an 8.81 percent gross receipts tax on propane deliveries to their homes because the propane also served a generator. Propane used exclusively for heating purposes is exempt from this tax, but not with a generator attached.

This made no sense. As part of the mitigation package, this law was revised to say that propane is exempt if it is “primarily” used for heating purposes, as opposed to “exclusively.”

The deficit mitigation package included some business tax rollbacks, including modifications to the controversial unitary tax, which drew much negative reaction when it was passed in June. The package offset restrictions on the net operating losses that companies can claim as a deduction against taxes, which should allow for more investments in research and development. The package restored about $4.5 million in grant funding that Gov. Malloy cut from mental health and substance abuse providers.

The Bad

Much to the chagrin of patients and employees, the legislature and governor have viewed our hospitals as piggy banks. Malloy’s plan to reduce hospital Medicaid reimbursement payments in September was met with universal criticism. Under Malloy’s plan, the hospitals would have lost $63 million in state reimbursements ($192 million total due to federal matching funds), but now will lose around $30 million ($92 million total). Is this an improvement? Yes, but local hospitals, such as Middlesex and Lawrence + Memorial, are still receiving cuts and must dip into savings, lay off employees, or reduce the quality of care provided. The Republican caucus proposal would have restored all of the governor’s cuts.

The mitigation plan calls for Malloy to find $110 million in additional savings, including $93 million from the executive branch, $2 million from the legislative branch, and $15 million Judicial. Since some of the governor’s proposed cuts in the past have been negatively received, there is no guarantee that this is a good thing.

The Ugly

Fund diversions are simply temporary fixes for the current fiscal year that will, most likely, have no effect on next year’s deficit or the following years. However, they will have long-lasting effects on the departments from where funds are being diverted.

Two such glaring cases involve our transportation fund and funds for our public colleges and universities. This mitigation plan calls for $35 million owed to the Special Transportation Fund (“STF”) to be diverted to the general fund, which will draw down the fund’s reserve and delay improvements. The nonpartisan Office of Fiscal Analysis indicates that the fund is on pace to fall into deficit by the 2018-19 fiscal year. In addition, on a separate piece of legislation, I supported allowing the public to vote on a constitutional amendment for a lockbox around the STF, but the necessary 75 percent of “yeas” in the House was not met.

The mitigation package also diverts $22.1 million from reserve accounts from our public colleges and universities. I believe this is the wrong approach. The Board of Trustees approved a 31 percent increase on in-state tuition at the University of Connecticut over the next four years, which is simply unacceptable, but not surprising. UConn and the Connecticut State University System need to find savings (such as eliminating the Board of Regents), but must do so in a way that won’t come at a higher financial burden to our kids. With the legislature forcing diversion of these funds, the universities may think they have no choice but to raise tuition.

The Republican caucus provided several amendments to provide real structural changes to how business is done in Hartford; unfortunately many of our long-term initiatives were ignored. These included properly implementing the constitutional spending cap, imposing an annual cap on state bonding, reforming pension and health care plans for new state employees (to align more with the private sector), revising prevailing wage laws to help municipalities control their costs, and combating out-of-control overtime.

These changes would have had a positive outcome and would have reduced our deficits going forward, but the legislature voted 75-65 for the “Band-Aid” package that still leaves us with projected deficits of over $500 million next fiscal year and over $1.5 billion the following.

I will continue to push next session for long-term sensible fixes to solve our ongoing fiscal crisis, or as Senate Majority Leader Bob Duff (D – Norwalk) calls it, “the new normal.” Nothing is normal about this.

Rep. Devin Carney, R-23rd district, serves Lyme, Old Lyme, Old Saybrook and Westbrook. devin.carney@housegop.ct.gov.