The Malloy administration has decided to use a new accounting method track its budget outlook, and it appears that the new method paints a better picture of potential deficits going forward. However, Nonpartisan budget analysts disagree.
The legislature’s nonpartisan Office of Fiscal Analysis predicted that starting in fiscal year 2016 there will be a $1.1 billion deficit based on current spending levels. They also predicted deficits ranging from $1.1 billion to $1.4 billion in the three following fiscal years.
The predictions stand in contrast to the projections released Friday by the Office of Policy and Management, Democratic Gov. Dannel P. Malloy’s budget office. The OPM predicted smaller deficits of $612.4 million in fiscal year 2016, followed by deficits of $432.5 million in 2017 and $376.3 million in 2018.
Why the difference?
It’s based on the assumptions used to compile the report. Nonpartisan analysts used the current services budget and adjusted it for inflation. This year was the first year the OPM deviated from the current-services model of budget projections and decided to stay closer to what they thought actual spending was going to be without inflation.
Malloy’s budget office inflated employee salaries 4 percent each year, but all other expenses and equipment were not inflated. The equipment costs beyond the minimum were assumed to come from the capital budget, according to the report.
OPM Secretary Ben Barnes downplayed the significance of future deficit projections.
“Estimates for the budget beyond next year are consistent with what out-year projections typically show: that we need to continue our efforts to grow the economy, add jobs, and budget within our means in the future just as we have done for the last three years,” Barnes said in a statement. “Indeed, the out-year problems identified in the report are a huge improvement over the massive structural imbalances that were shown in the reports published in 2009 and 2010.”
In 2009 under former Republican Gov. M. Jodi Rell, the OPM projected future deficits of $1.88 billion, $1.62 billion, and $1.4 billion for fiscal years 2012, 2013, and 2014. In 2010, the out-year deficits jumped to $3.3 billion, $3.05 billion and $2.98 billion for those same fiscal years.
In 2012, the year after Malloy’s first budget, which included the second largest tax increase in the state’s history, Barnes’ office predicted deficits in fiscal years 2014, 2015, and 2016 of $432 million, $157 million, and $13.6 million under a current services model. At the moment, the state is expected to end fiscal year 2014 with a small surplus.
Regardless of questions about the accuracy of these predictions, not a day went by during Malloy’s first two years in office during which he didn’t remind everyone that he had inherited a $3.7 billion deficit when he was inaugurated in January 2011.
Legislative Republicans were quick to scold Malloy for changing the accounting methodology less than a year before the 2014 election.
“For three years, Governor Malloy has calculated state deficits using current services estimates,” Sen. Minority Leader John McKinney said Friday. “Now, as he approaches an election year, he has chosen a different accounting method in order to show a rosier picture.”
McKinney is running for the Republican gubernatorial nomination, but his colleague in the House is not.
House Minority Leader Lawrence Cafero said Malloy is attempting to hide the likelihood of impending fiscal chaos ahead.
“Ignoring that news and trying to bend the numbers your own way, as the governor is attempting, is just wrong,’’ Cafero said.
The deficit projections Malloy’s budget office released on Friday were less than the $712 million it reported in June, and they were based on assumptions that have never been previously made, including changes in law related to spending mandates, Cafero said.
Malloy has not announced a re-election bid, but it’s widely assumed he will be running.
If he does run, he has more than just budget deficits to overcome. According to nonpartisan fiscal analysts, starting in fiscal year 2015 the budget is $11.9 million over the cap, and in fiscal year 2016 it jumps to $482 million over the spending cap. But the OPM is predicting the budget will stay under the cap.
This year, Malloy’s attempts to exempt certain forms of spending from the cap fell flat when a trio of Democratic Senators refused to go along with the plan. Instead, the administration came up with a new way of accounting for Medicaid funding.