Lawmakers from both sides of the aisle met with Gov. Dannel P. Malloy’s budget staff for a second day in a row behind closed doors to talk about the $243 million in spending cuts and $22 million in revenue increases the governor proposed last week.
Malloy administration Budget Director Ben Barnes declined to say Tuesday exactly where they were in the discussions, but noted that they have 8 days until the Dec. 19 special session. He said there’s still a lot of work that needs to be done and they will continue meeting until they finalize a package to mitigate this year’s budget deficit.
“I am hopeful we can reach a bipartisan solution on this shortfall,” Malloy said Monday after the state Bond Commission meeting. “That’s why we did not release a set of specific cuts. We need to go through a process.”
Republican Minority Leader Lawrence Cafero, R-Norwalk, whose party voted against the budget that’s now in deficit, said they remain ready to help resolve the red ink.
“We’re all there in good faith,” Cafero said Tuesday. “We want to get this thing resolved.”
All sides have agreed not to talk about the discussions, but Malloy’s office has been fielding calls all day about cuts to nonprofit service providers. Even though the providers have not specifically been targeted by Malloy’s proposal, many contract with agencies like the Department of Social Services or the Department of Developmental Services. Those two agencies have been targeted for an estimated $154 million and $26.7 million in spending cut respectively.
Pat Johnson, president of Oak Hill, told Malloy on Monday that the nonprofit service provider community has gone years without a cost of living adjustment. When the last COLA increase was granted, gasoline was still priced around $1.67 per gallon, he said.
As a result, he said, they’ve already been grappling with how to balance their budgets. Two years ago, 43 percent of nonprofit providers were running deficits. Many were dealing with chronic cashflow problems, he said, adding that around 72 percent were in danger of going out of business if any event adverse event occurred.
“For the past decades, budgets have essentially been balanced on the backs of our employees, with cuts to wages and benefits, with little or no increases during that time period,” he said.
Click here to read more about what the providers are saying about the spending cuts.
The bipartisan budget talks come just one day after the state Bond Commission approved $39.5 million in general obligation bonds for a variety of capital projects like replacing 50 boilers at Connecticut Valley Hospital in Middletown.
Republican lawmakers expressed concern Monday that the governor gave state Treasurer Denise Nappier permission to take out a $550 million line of credit.
At the moment the state is temporarily transferring money from these bonded capital projects to the state’s common cash pool, which pays for things like salaries and other operating expenses. As a precaution, Nappier sought a line of credit when the state’s cash pool registered a “negative balance.”
Deputy State Treasurer Christine Shaw said Monday that the state is currently negotiating with JP Morgan for the line of credit.
“It is merely an attempt to have in place a precautionary tool,” Shaw said. “It is something we would like to have in place in the event that the deficit mitigation efforts take a little bit longer than anticipated.”
She said the management of cash is different in timing than the management of the state budget.
“The treasurer tried to comfort us that they asked for the line of credit, but they may not need it,” Sen. Andrew Roraback, R-Goshen, said Monday. “But that doesn’t take away the fact that they asked for the line of credit.”
It’s a little bit like saying “pay no attention to the man behind that curtain,” Roraback said.
Rep. Sean Williams, R-Watertown, said even if the state doesn’t draw down the $550 million line of credit then it becomes a liability that will show up on the books when the rating agencies look at the state’s finances.
“It’s like if you open up a credit card and you’re not using it,” Williams said. The credit rating agencies are still going to take into consideration that “you could use it.”
“Connecticut’s in a position where we could have a hard time paying back our debts,” Williams said.