Office of Policy and Management Secretary Ben Barnes added a new subsection titled “Watch List” in his monthly letter detailing the state’s revenue and expenditure projections.
With little change between September and October “several areas of the budget have the potential to significantly impact the estimates provided in this letter,” Barnes wrote.
Barnes noted the higher than expected number of state employees who opted into the Health Enhancement Plan. The administration anticipated that more state employees would opt out of the plan and begin paying the higher $100 monthly premium, and a first ever deductible rather than participate in a wellness program. But 96 percent of the employees opted into the program.
As part of the State Employees Bargaining Agent Coalition agreement the administration anticipated that the state would save $102.5 million per year, for two years from the Health Enhancement Plan. Those numbers were primarily based on the amount of money it expected to receive from employees paying the higher premiums and deductibles.
Another area of vulnerability in the budget is the recently adopted Low Income Home Energy Assistance Program, which is funded mainly by the federal government. However, three legislative committees agreed that if the federal government didn’t come through with the necessary funding it would see if state funds could be used to help offset any shortfall.
“Finally, our projections for the General Fund assume no state resources will be provided to continue benefits under the Connecticut Energy Assistance Program should federal funding be exhausted,” Barnes wrote. “Connecticut’s share of federal LIHEAP funding should be sufficient to cover the benefit levels approved by the legislature.”
While he was unable to offer any projections on income tax collections because of the delay in reporting due to Tropical Storm Irene, Barnes did estimate the state will end the year with a $75.6 million cushion.
However, $75 million of it will immediately be used to offset the budget growth created by the transition to Generally Accepted Accounting Principles.
Transitioning from using a modified cash basis of accounting to GAAP could create a deficit as big as $1.5 billion. The budget calls for beginning to offset that deficit by using $75 million in this fiscal year and $50 million next fiscal year.
The remaining $600,000 from the projected $75.6 million cushion will be used to pay down the borrowing the state did in 2009.
“We also note that the adopted budget is only $1 million below the constitutional expenditure cap, so spending will need to be brought in line with appropriations in order to remain within the cap’s limit,” Barnes wrote.
Currently the state is spending $2.7 million over the cap, an increase of $700,000 over last month.
A shortfall of $30 million is projected for the Department of Social Services’ Medicaid account, and the Public Defenders Services Commission will experience a deficiency of $555,000 based on the projected $2 million shortfall in the contract attorney’s account due mostly to cases handled by child protection attorneys. The Teachers’ Retirement Board is also expected to experience a deficiency of $2.4 million in its health services account die to higher than expected membership.
Barnes said most of the deficiencies are offset by $15 million in the Treasurers’ Debt Service account as a result of a lower than anticipated interest costs on a bond sale in May, personal service lapses of $2.3 million, and $13 million from the Department of Children and Families.