Where’s My Surplus?

Below is an excerpt from the Office of Fiscal Analysis’ Overview of Governor Malloy’s Fiscal Year 2013 budget. Spending is increased, taxes are increased, the surplus all but disappears, consolidations produce no real savings, savings decrease and there is some confusing motion in the bottom line of the budget – none of which is good. Here’s hoping the relevant legislative committees read the report.

Highlights of OFA Synopsis of FY 13 Revised Budget Appropriations

Synopsis of Governor s FY 13 Revised Budget Appropriations Committee Hearing

February 9, 2012

1:00 PM

OFFICE OF FISCAL ANALYSIS

The following is intended to provide information on the Governor’s FY 13 Revised Budget for the Appropriations Committee as background for the OPM presentation. Since the budget was released only recently, we have tried to highlight the major areas of interest rather than provide a comprehensive analysis of the budget and revenue plan. Such analysis will be undertaken by the Committee with the assistance of OFA staff in the coming weeks.

I. OVERVIEW

Original FY 13 Budget Balance - The original FY 13 budget contained a $488.5 million General Fund surplus. Assuming the use of $50.0 million in funds for GAAP reserve and a projected decrease in FY 13 revenues (based on the January 17, 2012 consensus), the current balance for FY 13 stands at $299.8 million (assuming no change in bottom-line spending). The growth rate between the original FY 12 and FY 13 budgets is 1.3% (General Fund and all funds).

Governor’s Revised FY 13 Budget Balance - The Governor’s FY 13 Revised Budget increases spending by a net $313.9 million in the General Fund ($329.0 million in all funds). It also increases revenue by a net $15.7 million. When factoring in the loss of $138.7 million in projected revenue as a result of the January 17th consensus, the revised budget achieves a balance of $51.6 million in the General Fund. Assuming the use of $50.0 million in funds for a GAAP reserve, the balance is $1.6 million. The growth rate between the original FY 12 and the revised FY 13 budget is 3.1% (3.2% for all funds).

Lapses (Bottom-Line Reductions) - The original FY 13 budget contains $1.0 billion in various lapses (in all funds). Of this amount, $901.2 million relates to the labor management savings (Revised SEBAC 2011 Agreement).

The Governor’s revised budget: (1) eliminates the $901.2 million in SEBAC lapses (reductions) from the bottom of the budget, (2) moves $647.9 million of these reductions directly into individual agency budgets (see Appendix B for agency list), and (3) increases the existing Legislative branch lapses by $2.0 million, and (4) increases the Judicial branch lapses by $4.8 million.

Agency Consolidations/Program Transfers - The revised budget consolidates 13 state agencies into six agencies (five current and one new agency). This reduces the total number of state agencies from 59 to 52 (a 11.9% reduction). There does not appear to be savings or position reductions attributable to these consolidations. Detail on these consolidations appears within the “Financial Tables” section.

In addition, the revised budget transfers various programs and functions across several state agencies. A table listing the significant transfers of programs and functions between agencies along with the funding and associated positions appears within the “Financial Tables” section.

Abandon All Hope Ye Who Enter Here

All budgets are plans for the future. The budget worked out between Gov. Jodi Rell and the leaders of the dominant Democratic Party in Connecticut’s state legislature, principally Speaker of the House Chris Donovan and President Pro Tem of the Senate Don Williams, will go to press a little more than two weeks before the Democratic and Republican nominating conventions to be held in Hartford on May 21-22.

There are no surprises in the budget, which patterns, with almost ridged precision, the template of past budgets in which gapping holes were filled with chewing gum and hopeful views of the future.

Democrats, heedless of the warning signs everywhere apparent, are convinced that a rising tide will in the near future lift all the boats, Connecticut’s little bark among them. Collectively, the Democratic legislative caucus is Pangloss, drawing hope from the future rather than the past.

Pangloss was a character developed by Voltaire in Candide who, despite the horrors inflicted upon him by cruel fate, continued to believe that the world in which he lived was “the best of all possible worlds.” Earthquakes, revolutions, mass executions were unable to detach Pangloss, Candide’s philosophical tutor, from his inviolable optimism. The loss of his beloved to bandits who raped and mutilated her finally convinced a weary Candide that his philosophical tutor was a bit too optimistic for Candide’s own good.

Operating on the Panglossian notion that tomorrow will be the best of all possible worlds, state Democrats and Rell have now put forth a budget that optimistically looks past what some more worldly Republicans and a handful on unblinkered Democratic legislators regard as the coming train wreck.

Almost half of Connecticut’s budget crater is to be filled by contributions from an administration in Washington that has, in the two years it has been in office, tripled the national debt. The real cost of the new programs initiated by the president and the dominant Democratic congress have not yet registered on the national economic seismograph. Public debt as a percentage of Gross Domestic Product has increased fourfold during the current administration.

Tin cup in hand, Connecticut has now become a beggar state. It is not alone.

And it is only a matter of time before cash poor Washington begins to treat beggar states in the same way large beggar corporations have been treated., Uncle Sam, himself indebted to foreign states from which he is borrowing heavily to meet his own obligations, surely would not be willing to give alms to wealthy states like Connecticut in the absence of budgetary proof that the state has instituted cost saving measures. New Jersey’s legislature, prodded by a cost conscious governor, has offered some proof that it is serious about controlling future spending.

Connecticut has not

There are no serious costs saving measures in Connecticut’s new budget. It is a budget that will satisfy pressure groups that control powerful legislative leaders in the House and Senate. It is a budget that answers the unstated question roiling in the minds of wealth producing entrepreneurs who, following others gone before them, will vote with their feet by either leaving the state or refusing to come here.

Even New Jersey will offer greener pastures to wealth generators than Connecticut.

In addition to providing a view to the future, Connecticut’s most recent budget is a reliable measure of the cowardice of politicians.

How to uncommit budget suicide

Governor Rell and the Legislature are back in Hartford, tackling yet another multi-hundred-million dollar state deficit. It is all too familiar. But this session can be different, if our political leaders confront reality, introduced by none other than the unlikely figure of Willie Brown, for decades a California liberal pro-union icon.

Last month, Brown wrote, "Over the years the civil service system has changed from one that protects jobs to one that runs the show. It used to be that civil servants were paid less than private sector workers in exchange for job security. Politicians expanded pay and benefits to private-sector levels while keeping the job protections and layering on incredibly generous retirement packages that pay ex-workers almost as much as current workers. Someone is going to have to get honest about the fact that 80 percent of the state, county and city budget deficits are due to employee costs."

That just about sums it up: Our leaders have to get "honest," or our state will never solve our permanent structural deficit. The budgetary meltdowns in California, New York and New Jersey are nothing less than a blueprint for the future of Connecticut if we don't heed Brown's call to get "honest," or as I say, to face reality.

When Brown was the Democratic Leader in the California House, he always voted to increase benefits and salaries. It was after he became Mayor (that is, executive) of San Francisco that he realized that the situation was untenable.

That's been the problem. The Governor is the executive of a state, while the Legislature gets to dole out the goodies. For most of these states, regardless of who the Governor was, the Democrats had the legislative power to push through huge contract increases for the state employees.

How bad is the problem? A report in USA Today found that the average (federal) government worker's pay is $71,206, compared with $40,331 in the private sector. So not only do government workers get great benefits and pensions, but now actually earn more money than their private-sector counterparts. And yes, they still have the vaunted "job security." The Stimulus, in effect an enormous transfer payment to government workers, has allowed the states to keep workers despite their red ink, so that public worker unemployment rate is less than 3%, and the private sector rate is over 12%.

If this were a private company, the response to these chronic deficits would be a fait accompli: amend the contracts, lay some people off, or go out of business. It would be up to the CEO to do the amending.

That brings us back to our budget talks. Governor Rell is retiring after this term. There has never been a better opportunity for our chief executive to tell the people of Connecticut the truth,which is that we simply cannot go on treating our state workers as if they were a protected class. They have to live in reality, as the rest of us do.

So far, she has tinkered around the edges of the Democratic proposals, which coddle state workers while we pay them with borrowed money. (I single out Democrats throughout because the civil service unions, such as a SEIU, AFSCME and CSEA, work closely with the Democratic Party. SEIU President Andy Stern, for example, has had more meetings with President Obama than any other official.)

As this is Rell's last budget go-round, I would love to see her take the process to the public, explain the stakes, and simply let the people put pressure on their legislators and force them to make the fiscal adjustments necessary to make our budget fundamentally sound. To get reality. Or as Willie Brown says, to get "honest." It would be a fantastic legacy of leadership to leave behind.

This column first ran in the Fairfield and Westport Minuteman newspapers on February 11, 2010. Link: http://www.minutemannewscenter.com/articles/2010/02/12/fairfield/opinion/op_ed/doc4b7323ce26faa012141124.txt