Wednesday, February 22, 2012

New And Improved Budget Smoke And Mirrors

Unhappily for Malloyalists everywhere, at least one reporter was not sound asleep when Governor Dannel Malloy’s administration unveiled a PowerPoint presentation at a recent budget briefing showing that the budget will be in balance in 2012-13 and thereafter reap surpluses in 2013-14 of $226 million and $942 in the final year of Mr. Malloy’s gubernatorial term.

“In actuality,” the reporter wrote, “if the administration's estimates for expenditures -- including the conversion to Generally Accepted Accounting Principles -- and revenues are compared, the budget is balanced only in its first year. There's a $424 million shortfall in 2013-14 and a $180 million hole in 2014-15 -- the same year Malloy's budget office projects a nearly $1 billion surplus.” Absent the smoke and mirrors employed by previous Republican governors and Democratic dominated legislatures, future Malloy budgets are not in balance.

The budgetary magic that transforms real deficits into imaginary surpluses rests upon a skill employed by most governors that “takes advantage of the legislature’s and media's optimistic tendencies when it comes to state finances”, according to retired lawmaker William Dyson, formerly the Democratic co-chairman of the state’s Appropriations Committee for 16 years. The more often bad news can be presented as good news, the better, said Mr. Dyson: “The environment there [in the General Assembly] has always been to turn your head and look away from anything bad. There's always been this notion that next year might be better and not something we need to worry about today."

The Malloy administration’s Panglossian outlook rests on the following assumption: Mr. Malloy’s new budget will exceed Connecticut’s in name only “spending cap” by $650 million one year after enactment and by $1.1 billion two years out; however, if it is supposed that the Malloy administration will at some unspecified date in the future abide by the spending cap and actually cut spending below it – then the administration would have realized its PowerPoint predictions.

And if pigs had wings…

The mental gymnastics involved in this mode of thought – if it may be called that – has astounded North Branford Republican Rep. Vincent J. Candelora, who asked the BINGO! question: "How can you say your plan is sustainable if you count ‘cuts’ you haven't made and aren't going to find for another year?"

The magic figures presented during Mr. Malloy’s PowerPoint presentation cast a spell over some reporters who, Mr. Candelora noted, left the room whispering that Mr. Malloy’s budget proposal would result in a “bipartisan love-fest” during the upcoming legislative roustabout. "I've never been optimistic about the media taking the time to pick it apart and understand it," said Mr. Candelora. "I think they do a good job at taking things and getting them at a 30,000-foot level, but I'm not sure that kind of analytical media exists anymore."

And veteran Democratic legislative leader Dyson agrees that the legislature is easily distracted and unaccountably trusting: "I don't think the rank-and-file will pay a lot of attention to the deficit as long as the people with their finger on the pulse aren't worried. They trust all of the heavy hitters, and they will go along with what they suggest."

In the last budget session, Mr. Malloy bravely took some hits from union leaders and perennial critics in the General Assembly during his negotiations with SEBAC. The Democratic dominated General Assembly pre-approved Mr. Malloy’s prospective budget as Dannel struggled alone with the union leaders in the lion’s den. By investing the governor with near plenipotentiary powers, Democratic legislators up for re-election were not forced to leave telltale fingerprints on the final negotiated budget package, a division of labor useful both to the governor and General Assembly Democrats. SEBAC, the coalition of state unions authorized to negotiate contracts with the governor, emerged with a deal in hand so favorable to union interests that Senator Edith Prague, a union well-wisher of long standing, declared somewhat volubly that the union rank and file would be insane to reject the proposal.

“We would receive four years of job security,” union negotiators boasted in a memo to rank and file members, “an extension of our health care and pension plans to 2022, an irrevocable trust fund to insure there will always be retiree health care, three years of wage increases, a reaffirmation of the independence of the state employee health plan, and contract protection lasting through 2016. Additionally, all of the layoffs, anti-union legislation, and faculty/office closures would be reversed.” All in all, the deal was a gold brick for union leaders.

But Gold bricks are expensive, and the expenses will show below the veil once the state abandons its present system of smoke and mirrors accounting and inaugurates Mr. Malloy’s preferred Generally Accepted Accounting Principles (GAAP). At that point, Mr. Dyson said, "You may hear some suggestions from [legislative] leaders that maybe we ought to be reducing some of the growth in this new budget to remove some of the risk. It has to be done carefully, without looking like there is going to be a fight. But it can be done and it could even solidify the caucus more."

A one party state is so much more efficient when the legislative caucus and the governor are reading from the same script.

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