Rell to draw on emergency funds

For the first time since 2002, the state is tapping into its reserves.

In a move that speaks to the severity of Connecticut’s economic woes, Gov. M. Jodi Rell’s executive budget, currently under consideration in the General Assembly, is set to draw upon the state’s $1.4 billion budget reserve, or “Rainy Day Fund.” Though the fund was conceived to be spent only in emergency situations, such as the current crisis, there is concern among state economic experts that the depletion of the Rainy Day Fund may put the state at risk down the road.

As the state faces an $8 billion deficit over fiscal years 2009, 2010 and 2011, the Office of Policy and Management, the state’s executive budget agency, said the situation will only deteriorate in subsequent years. OPM officials predicted an additional $5 billion shortfall over fiscal years 2012, 2013 and 2014. Spending from the Rainy Day Fund is set to occur in three annual installments, beginning with the current fiscal year.

“Projecting a gap three years away is almost in the realm of voodoo,” OPM spokesman Jeffrey Beckham said in an interview Tuesday. “We have been having enough trouble calculating the deficit for the current fiscal year, revising our projections month to month.”

Beckham contrasted the current use of the reserve to when it was last expended in 2002 — when, he said, the state drained the entire fund in one day.

“We are being more responsible,” he said of Rell’s decision this time around. “We have been trying mightily to preserve the fund as long as possible by spreading the money from the Budget Reserve Fund over three years. We are hoping natural economic cycles, as well as the federal stimulus, will begin to pull us out of this crisis.”

Adam Liegeot ’94, a spokesman for the governor, explained Rell’s decision to fully expend the Rainy Day Fund, saying she is making structural changes to state government now to address the projected future gap.

“Governor Rell’s budget for the next fiscal year is actually lower than the budget this fiscal year,” he said in an e-mail to the News. “She is also proud of the fact that her budget contains no tax increases for the next two fiscal years.”

The bottom line, Liegeot added, is that smaller restructured government, a priority of Rell’s plan, will position the state to withstand future crises.

“Families across Connecticut are making do with less,” he said. “So can we.”

Rell’s budget proposal includes $40 million to begin regionalizing Connecticut’s individual municipalities to save administrative and facilities costs, said Nicholas Perna, a lecturer in Yale’s Department of Economics and a member of Rell’s economic advisory board. This regionalization, he explained, represents a long-term method by which the state will seek to curtail future spending, which is central to mitigating potential future deficits.

“Regionalization is the only way to lower states’ high property taxes,” he said earlier this month. “It may start off with municipalities sharing snowplows, but we are moving toward sharing administrative costs and facilities.”

That said, support for expending the Rainy Day Fund as a short-term fix has received broad bipartisan support.

As Douglas Hall, acting managing director of Connecticut Voices for Children and a professed critic of Rell’s budget proposal, said, the state has little choice but to crack open the state piggybank.

“It is pretty clear to everyone,” he said, “that it is a rainy day.”

Rell is expected to release a revised deficit mitigation plan for fiscal year 2009 as soon as Wednesday.

Comments