A miscalculation in Gov. Dannel Malloy’s proposed two-year, $40 billion budget has crystallized the importance of checking the facts.
The error — which pushed the budget over the spending limit by at least $54.5 million — stems from a discrepancy in the personal income data used to calculate the spending limit, Ben Barnes, secretary of the Office of Policy and Management, said in a statement Tuesday afternoon. Specifically, the mistake came from starting at the wrong point on the calendar. When calculating the growth rate of the expenditure cap for the next two years, the state legislature’s Office of Fiscal Analysis typically uses personal income starting from the third quarter of the calendar year. Malloy’s budget, though, drew data starting with the fourth quarter.
“On behalf of the agency, I personally apologize for this discrepancy, and commit to working with OFA and the legislature to identify the adjustments necessary to ensure compliance with the expenditure cap,” Barnes said in the statement.
The inconsistency, according to Barnes, occurred because the data was drawn from a new outside vendor that shifted the reporting period one quarter later. But the OPM did not notice the shift until after the budget was prepared and submitted to the state legislature.
OPM spokesperson Gian-Carl Casa said the vendor in question was IHS Global Inc., a Colorado company that received $41,000 to offer economic forecasts on which the governor’s budget then based its revenue forecast.
Barnes said that when calculated correctly, the expenditure cap growth rate decreases, causing the 2016 fiscal year’s spending cap to drop approximately $60 million from Malloy’s original cap. He added that, with revised data, Malloy’s budget would be $80 million below the cap in the 2017 fiscal year. The budget originally projected spending to run $6.3 million under the cap in the 2016 fiscal year and $135.8 million below the limit in 2017.
However, a second spending cap issue was brought up by Republican state Sen. Robert Kane, the ranking member of the General Assembly’s Appropriations Committee, during a hearing with Barnes last week.
Beginning next fiscal year, Connecticut must deposit $48 million to a special reserve account annually in accordance with the Generally Accepted Accounting Principles. A contract between the state and bond investors in 2013 also required that these deposits be included in the budget and thus included in the cap. But Malloy’s budget moves the deposits outside of the budget, exempting them from the cap.
In a news briefing on Wednesday, Malloy said that he has no intentions to adjust his plan or suggest additional spending cuts, leaving the budget for legislators to contend with.
But Republican legislators said they are displeased with the budget at hand.
Senate Minority Leader Len Fasano said in a statement on Tuesday that Malloy had originally sold his budget as under the spending cap, but that Republicans had known it was over the cap when Malloy presented it. He added that Barnes’s announcement and the GAAP “spending cap gimmick” coupled together lead to a budget that is $101 million over the cap.
Senate Assistant Minority Leader Joe Markley said he suspects the governor submitted his budget with the intention of forcing legislators to write their own budget, which would include spending cuts.
“The governor has given us a very ugly budget,” Markley said. “It’s ugly because of its errors, because of items taken off budget to make it look better, because of cuts through the social safety net — even for a conservative Republican, [I find these] are hard to stomach.”
State Rep. Vincent Candelora, a Republican representing Durham, Guilford, North Branford and Wallingford, echoed this sentiment. He added that some of the cuts within the budget are both “dramatic” and “not workable.” He cited the virtual elimination of funding for state probate courts — specialized courts that deal with social service issues — and the probable elimination of these probate courts as a whole if Malloy’s budget is passed.
Both Markley and Candelora noted that, in light of hefty tax increases passed at the beginning of Malloy’s first term as governor, they did not expect this new spending cap problem to be solved through tax revenue increases.
The legislature, Markley added, must find more places to cut to get spending back under the cap.
Nonetheless, Republican State Sen. Scott Frantz said that though mistakes like the personal income data discrepancy alone are not necessarily catastrophic, the accumulation of these errors could prove worrisome.
Barnes will hold a budget briefing with the Finance, Revenue and Bonding Committee tomorrow at the state capitol.