On June 19, 2013 Governor Dannel P. Malloy signed the $ 36.6 billion state budget for 2013-2014 which enacts no new taxes. This budget eliminated a projected deficit of $ 1.9 billion without increasing income or sales taxes.
You may be surprised to learn Connecticut has a $ 236.6 million surplus projected for this fiscal year. All this and the state adopted Generally Accepted Accounting Principles (GAAP) when Governor Malloy took over which previous administrations had resisted.
Sounds like good news doesn't it?
Not to Assembly Republicans, apparently, as they voted against the budget in a block and criticized the budget for leaving in place $ 315 million in new revenues including taxes that otherwise would have sunset and for violating the constitutional budget cap.
As reported in the Connecticut News Junkie:
"Republicans ... opposed an accounting change, which only counted the net impact of Medicaid spending after the federal government has reimbursed the state. The plan moved more than $6 billion in spending out from under the state’s spending cap, a change necessary to keep spending below the ceiling. Without the change, the budget would be about $44 billion, an increase of almost 10 percent over the last biennium."
The state spending cap, which caps "general budget expenditures" by a percentage of the previous fiscal year's expenditures tied with percentage increases in personal income growth or inflation, along with the balanced budget requirement, which limits general budget expenditures to the estimated revenues, were added to the state constitution in 1993 in response to the fears of some that the new state income tax would lead to runaway spending.
In the past Republican Governors would get around this spending limit by declaring an emergency or "the existence of extraordinary circumstances" supported by a three-fifth vote of each house.
This time the "extraordinary circumstance" was the expansion of Medicaid to include more people under Obamacare and the increase in federal revenues to pay for the expansion. Under ordinary budgeting principles the revenues would cancel out the expenses for a revenue-neutral item or only the net increase would be recognized as a budget change but the state cap is based on increased spending without regard to increased revenues so without an accounting change to reflect the net costs of Medicaid the budget would exceed the spending cap without regard to the substantial federal revenues flowing into the state as part of the health care reforms.
Republicans saw blood and the opportunity for a rare legislative victory so demanded cuts elsewhere to put the budget into compliance with the spending cap's limitation on increased spending over the previous fiscal year. The Governor and Assembly Democrats responded with an accounting change which recognized only the net increased Medicaid costs and, in effect, took the Medicaid expansion out of the spending cap. This approach has been used in other states that opted to participate in the expanded Medicaid eligibility.
Are you bored yet? Get ready to hear a lot more about the state budgets since next year gubernatorial election will likely feature much debate about state finances and Governor Malloy's efforts to bring the state budget back from the deficits he inherited from his predecessors Rell and Roland.
