Republican legislative leaders and hospital executives called Tuesday on Gov. Dannel P. Malloy and Democratic legislative leaders to hold a special session to “holistically” address potential problems with the 2016 state budget.
Last week, the Malloy administration used its executive authority to cut nearly $103 million from the budget in response to a drop in the stock market. Malloy has the power to rescind up to 5 percent of any line item and 3 percent of any fund without seeking legislative approval.
Republican Senate Leader Len Fasano, R-North Haven, said Republicans aren’t advocating for any specific changes to the budget until they can get a seat at the table with Democratic leaders to discuss those changes.
He said he doesn’t care why the budget is currently out of sync with the assumptions, but what he does care about “is obviously we’re running into a problem” and Malloy only has so many ways to resolve it without the legislature’s help.
“This is about the process of budgeting in the state of Connecticut,” House Minority Leader Themis Klarides, R-Derby, said. “And how doing it in a patchwork way almost month-to-month based on a deficit that continues to come is not an effective or efficient way of doing it.”
Three months into the 2016 fiscal year the state has a $600,000 surplus.
Fasano said that means the state is only $600,000 above water, “which can go in a minute.” He urged his Democratic colleagues to let Republicans into the room to discuss potential changes to the state budget.
Republicans have been shut out from budget negotiations for five years.
Klarides said the legislature is abdicating its fiscal authority if it allows the executive branch to continue managing the budget in this way on a month-to-month basis.
“Let’s sit down and figure out where we going and how we get there,” Klarides said.
Because if the legislature doesn’t do that, Klarides added, then it’s going to continue to hurt the most vulnerable citizens in the state because services to those citizens are the only ones Malloy has the power to cut.
But Democratic leaders weren’t about to take that bait.
“Given the governor’s authority, a special session makes no sense, and perhaps the Republicans should get themselves in a room to figure out their own position,” House Speaker Brendan Sharkey said in a statement Tuesday.
He said they will monitor the rescissions and will have an opportunity to reverse the cuts during the next regular session, which starts in February.
That might be too late for hospital staff, who could be laid off in the next few months.
The Malloy administration cut $63.4 million in Medicaid funding to hospitals, which is about 40 percent of the funding the 29 acute care hospitals receive from the state. It amounts to about $190 million in cuts because the state receives a federal matching grant for the amount of money it spends.
Jennifer Jackson, CEO of the Connecticut Hospital Association, said bluntly that what’s going to happen is that “people are going to lose their jobs” at a time when the state needs job growth.
“The economy of the state of Connecticut will be harmed,” Jackson said. “What a lot of people don’t realize is what a huge part of the economy hospitals are. We contribute $20 billion to the state’s economy.”
Pat Charmel, CEO of Griffin Hospital in Derby, said about 60 percent of operating costs in hospitals are labor. It’s still too soon to stay how many will lose their jobs, but each of the hospital leaders who attended the press conference said staffing is something they have to examine.
He said the governor’s rescission authority is a “blunt instrument.”
Calling the state legislature back into session would offer a “more thoughtful approach” to balancing the state budget, Charmel said.
Charmel said the effective tax rate hospitals are paying to the state “is four to five times what for-profit corporations are paying,” at a time when “our industry is going through a radical transformation.”
But the Malloy administration doesn’t buy the hospitals’ struggle. The governor’s spokesperson distributed the most recent information on executive hospital pay following the press conference. Yale New Haven’s President and CEO makes more than $2.5 million and has a package of about $1 million in fringe benefits, while Saint Francis’ President and CEO makes about $2.8 million with a package of about $303,000 in fringe benefits, according to the most recent information reported to the Office of Health Care Access.
Jackson said executives at hospitals should be well compensated and the discussion about compensation is a “distraction” from the real issue of hospital cuts.
“We need to be able to attract and retain the most capable and brightest executives,” Jackson said, adding that the argument about executive compensation is not significant to the conversation. She said the state gives tax breaks to for-profit companies with CEOs who make “multiples” of what hospital CEOs make.
“The conversation is about how do we take care of the people in the state of Connecticut and how do we improve our state’s economy,” Jackson said.
But Devon Puglia, Malloy’s communications director, said the message House and Senate Republicans sent Tuesday was that “they want the residents of this state to fund tens of millions of dollars in executive compensation.”
He added: “The hospital industry made hundreds of millions of dollars in profit last year, with executive teams making money hand over fist. Put simply, while we’re taking smart steps to ensure budget balance and plan for the long term, some obviously want taxpayer dollars to fund massive CEO salaries without doing anything to make care delivery more efficient and cost-effective.”
After the Malloy administration’s latest cuts, the state is still set to provide about $1.86 billion to hospitals this fiscal year.
And even though Republicans wouldn’t talk Tuesday about potential spending cuts or tax increases, they were okay with reducing compensation for state labor unions.
Malloy can’t cut entitlement programs or municipal aid without legislative approval, but he will have an opportunity in January sit down with the state employee unions to re-negotiate their salaries.
Klarides said that’s the elephant in the room.
“Now the governor has the opportunity to get it right,” Klarides said implying the $1.6 billion in concessions he got from labor in 2011 wasn’t enough.