Empty second floor of the state Capitol where lobbyists and the public would have been in a normal session.
Alan Calandro
ALAN CALANDRO

In addition to Part 1 of this topic on February 14, there are a couple of other key items that you have probably seen referenced but may find confusing: lapses, deficiencies, budget surpluses and deficits, and budget implementers.

First, what the heck is a lapse and a deficiency? On a basic level, a lapse is a surplus and a deficiency is a deficit is a shortfall in an appropriated account. Once the budget year starts (July 1), every appropriated account is tracked by staff in OPM, the Comptroller’s Office and OFA who compare what was budgeted to what it estimates will be spent for the year in each account. The published projections of all three agencies tend to be similar although OPM has the most insight since agencies answer to them while at the same time OPM is most likely to hold information back for political purposes. 

Agencies themselves are required by statute to produce and transmit monthly reports on expenditures and staffing (but many fail to do so at all, produce them once in a while, or share them only with OPM). 

Unfortunately, although lots of fancy documentation might be produced by various budget staff, no one really knows what will ultimately be spent. Partly because no one knows what future events will affect spending. But it also is just a practical reality. Although not “acceptable,” analysts that “track” account spending generally take what the agencies report or tell them and transfer it to their own spending forecast. 

Analysts can review various other information sources but they can’t see inside the agency and a lot of effort often yields unilluminating results. Exceptions to this are those accounts where data can be seen more equally such as Medicaid which is caseload driven and anyone can look at the same data and make an independent forecast. But even in these cases, agencies can do things internally like structure the timing of payments to increase or decrease spending over a timeframe which will be unknown to the analyst. 

Agency personnel have all sorts of interests (many understandable) in skewing their numbers. But even with the distortion of some numbers, the agency budget chief, let alone the agency head, doesn’t know what is truly happening with agency spending (except for very small agencies). Maybe the information is solid and maybe it’s not. These numbers may or may not be questioned along the chain by more or less motivated managers. The farther away one gets from the source, the more one is just repeating what has been reported by other people.

Once recorded, all of the estimated lapses and shortfalls can be totaled to determine whether the state is meeting its budget. The total can show that the state is spending more than it has budgeted, but the state may not actually be in deficit. How can that be? Because at the same time that spending is being tracked, the tax and revenue items that were set up in past years (such as the sales tax rate) or changed for the current year are also tracked and compared to the original budget. And revenue can also be above or below the original targets each month. Comparing total estimated spending against total estimated revenue yields a state surplus or deficit. 

According to OPM then, the state for this current year is expected to take in $890.7 million more in revenue and spend $344.8 million less than was budgeted. Buried in the total estimated expenditures as of February are eight agencies that are overspending their budgets by $94 million.

This is a signal that these agencies will need supplemental appropriations by the legislature to keep operating normally. These numbers are put into the “Deficiency Bill” that looks like a mini budget bill and is usually passed alone. But like all bills can be lumped into another bill such as the budget bill or a budget implementing bill if the timing demands it. Or on rare occasions, all of these can be placed in one bill for a vote.

A lapse, however, can also refer to a bottom line reduction to the budget. At the end of every General Fund and Special Transportation Fund budget there will be at least one lapse – the Unallocated Lapse – and often other programmatic lapses. The Unallocated Lapses (usually one for each of the three branches of government) reduce the size of the budget – in the case of the governor’s recent budget bill by $53.7 million. The unallocated lapse is a budgeting device that is not supposed to create any reductions to agency budgets. It is considered a “natural” lapse because in large budgets with a wide variety of accounts many accounts will not naturally spend all of their funding. 

Budgets will often include other lapses which are considered unnatural or “forced.” Forced lapses can be programmatic in nature such as the “CREATES Savings Initiative Lapse” which allows the governor to reduce funding to agencies “to achieve retirement, restructuring or efficiency savings” that are expected as a result of upcoming collective bargaining changes where more than 25% of state employees could retire. 

A lapse could also be “across-the-board” such as a “General Other Expenses Lapse.” These lapses are really budget cuts that are usually employed during tight budget years due to the undesirability of cutting specific programs. Back of the Budget language is necessary to give the governor the unilateral authority to reduce the actual funds an agency receives to achieve the specified savings. Altogether, lapses reduce the proposed budget by $129 million. In recent years, to avoid giving the governor too much discretion to cut some agencies more than others, the Appropriations Committee has incorporated the anticipated lapse reductions directly into the line items.

So what’s a budget implementer bill? Unless there are only simple funding level changes to buy more or less widgets (which never happens), existing law must be changed to implement the budget’s policies. For example, the governor proposed expanding the property tax credit. Since the tax credit is defined in statute, the law must be changed to make the proposal work. If the budget passes without a language change the collection of revenue would remain unaffected. 

The number of implementer bills is decided by the legislature as the budget develops and varies from year to year depending on the number of changes needed and the amount of time available. There can be a “Health Implementer,” a “Public Safety Implementer,” etc. as needed.

But there will always be the dreaded “General Government” or “OPM” implementer. The negotiations over it take countless hours and multiple weeks under an atmosphere of uncertainty. The players and the location are the same as those negotiating the budget. It is often the last bill of the session taken up at the last minute or in a special session (after running out of time in the regular session). It undergoes a seemingly never-ending list of items for consideration and therefore a constantly expanding bill length. Anything that any member wants (from the majority that is, with maybe a few exceptions from the minority) can get thrown into it that has nothing to do with the budget. Legislative leaders ultimately decide its contents.

The General implementer can be hundreds of pages long. After being negotiated by a small number of people, it is dropped in the lap of the legislature to be voted on almost immediately. Members, especially from the Republican Party, complain about the lack of time to read let alone comprehend what is in the bill. But the votes have been counted and its passage is preordained. The most the Republican Party can do is complain and drag out the debate on the bill. If the bill is dropped on the last day of the session when it has to pass both chambers this gives them leverage by debating until time runs out. This is a way that they can get a few items included of their own in exchange for keeping debate within a reasonable range.

Alan Calandro is the former director of the Legislature’s nonpartisan Office of Fiscal Analysis.

Alan Calandro

Alan Calandro is a life-long unaffiliated voter and former director of the legislature’s nonpartisan Office of Fiscal Analysis.

The views, opinions, positions, or strategies expressed by the author are theirs alone, and do not necessarily reflect the views, opinions, or positions of CTNewsJunkie.com or any of the author's other employers.