(Updated 6:50 p.m.) Gov. Dannel P. Malloy declined to give specifics about where budget negotiations stand when it comes to getting around the spending cap, but hinted that he was open to shifting federal Medicaid dollars off the books.
After it became clear last week that Malloy and legislative Democrats didn’t have the three-fifths majority necessary to change the spending cap, they sought to get around the issue by not counting the Medicaid revenue the state receives from the federal government.
“Find me one person who thinks because the federal government’s going to send us $500 million more next year, that we should cut education funding by $500 million,” Malloy said Friday at an unrelated event.
According to the Office of Fiscal Analysis, counting Medicaid—which will be 100 percent reimbursed by the federal government starting in 2014—would cause the state to exceed the cap by about $446 million in the first year of the budget, and $689.5 million in the second year. Medicaid helps pay for health care for the poor and disabled and enrollment in the program has increased over the past two years as the economy struggles to recover.
“We have to have a budget,” Malloy said. “I believe we will have a budget and we’ve just got a lot of work to do in the coming days.”
Malloy had proposed changing the state spending cap this year when he released his budget in February. The spending cap was implemented a year after the income tax in an effort to quell some of the anger over the enactment of the state income tax. It was put in place to keep state spending in line with annual growth in personal income.
But it takes a three-fifths majority of the General Assembly in order to change it. That means all 22 Democratic Senators need to vote in favor of the measure and there are at least three possibly more who are not in favor of those changes. Republican lawmakers are opposed to the measure too.
In a press release this week, House Minority Leader Lawrence Cafero called maneuver a budget “gimmick” that makes a mockery of the budget process. The House Republican’s Facebook page is displaying an image similar to the one found in London’s Underground that says “Mind the Cap.”
“The Democratic budget was already filled with gimmicks but since they can’t find enough votes to skirt the cap, they are taking gimmickry to an absurd level,” Cafero said.
But Cafero voted for a similar maneuver back in 2001 when the state figured out it could get the federal government to cover individuals eligible for both Medicare and Medicaid. The move saved the state about $45 million.
“The two have no similarity at all,” Cafero’s spokesman Pat O’Neil said Friday. “We were coming off of almost 10 years of budget surpluses and everyone fully understood what was happening.”
“Times have changed,” O’Neil said.
The state is now facing a nearly $3 billion deficit over the next two years and Malloy has promised not to raise any new taxes.
“If Democratic legislative leaders are in fact offering this proposal, I urge Governor Malloy – who promised no more taxes and no more gimmicks – to reject them outright,” Sen. Minority Leader John McKinney said in a statement earlier this week.
But McKinney also voted for the budget back in 2001 that changed how federal funds are appropriated.
In a phone interview Friday, McKinney said times have changed. Connecticut’s economy is weak and the state budget is facing a close to $3 billion deficit over the next two years.
McKinney said the $45 million they took off the books is dramatically different than $1.2 billion over two years they want to remove from under the cap.
“It’s not unfair or wrong to classify 2001 as a gimmick,” McKinney said. “However, Malloy promised when he took office that he wouldn’t participate in any budget gimmicks.”
Cafero maintains that the plan violates the state Constitution even though both he and McKinney offer economic arguments.
Republican Party Chairman Jerry Labriola Jr. told The Hanging Shad that he hasn’t ruled out legal action if the Democratic majority and Malloy go forward with their plan.
“We always have the option of legal recourse,” he told the blog.
It’s unclear how serious the Republican Party is about legal action. Labriola declined comment on the issue Thursday.
House Speaker Brendan Sharkey said last week that if the Senate is unable to get the necessary votes to modify the spending cap, then it’s something they will have to consider.
“Other states do this. They don’t include their Medicaid costs that are being reimbursed under their budget,” Sharkey said.
Rep. Toni Walker, co-chairwoman of the Appropriations Committee, has said the legislature needs to address the spending cap issue because if it didn’t it would need to cut another $1 billion from the budget to achieve what it wants to achieve.
“We are at bare bones right now,” Walker said last week. “We don’t have any more room.”
Sources say they are looking at running a budget as soon as Wednesday, May 29. The legislative session adjourns June 5.