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May 7, 2024

CT House to put last ARPA funds toward higher ed, other programs

SHAHRZAD RASEKH / CT MIRROR Gov. Ned Lamont addressing the General Assembly at his sixth State of the State address.

The House of Representatives is expected to assign Connecticut’s last tranche of emergency federal pandemic aid this week, assigning at least $360 million to bolster higher education, social services, mental health, early childhood development and municipal aid this fiscal year.

Rather than formally adjusting the $26 billion budget adopted last June for the 2024-25 fiscal year, which would have to be reduced because of spending cap rules, Democratic lawmakers and Gov. Ned Lamont negotiated a deal to bolster programs by working outside of the budget. The package, released publicly Monday morning, also expands Lamont’s authority to unilaterally shift funds around within the budget once the fiscal year is underway.

Leaders also said they planned to transfer at least $100 million of this fiscal year’s $257 million operating surplus into 2024-25, though it wasn’t immediately clear exactly how much would be used. 

The bill, which also is expected to win approval in the Senate, was attacked by minority Republicans as an end-run around Connecticut’s budget controls and the state Constitution’s balanced-budget requirement. Worse still, the GOP argued, it creates more than $500 million in budget holes legislators must fill 12 months from now.

Adding big dollars to public colleges and universities

Public colleges and universities already have ordered significant tuition and fee hikes and begun plans to cut staff and programs in anticipation of state funding cuts starting July 1. Regional state universities, community colleges and the University of Connecticut have had their operating costs supported in recent years with hundreds of millions of dollars from two temporary sources: federal pandemic aid provided Connecticut through the American Rescue Plan Act (ARPA) and state budget surplus dollars.

But most of the $2.8 billion ARPA allocation Connecticut received from Congress in 2021 has been exhausted, and the state must assign all pandemic aid for final use by Dec. 31.

“Education equalizes our communities — it gives us opportunities,” Rep. Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee, said during a mid-morning press conference early. “And when you start to reduce those fundings, that’s when we start to change our tune.”

Lamont, a fiscally moderate Democrat, had called for the legislature to allow overall aid to colleges and universities to shrink, arguing it would involve hard-but-necessary choices.

But the governor’s fellow Democrats in the legislature declined, arguing it would burden low- and middle-income families, limit access to higher education for many poor students and ultimately weaken Connecticut’s economy.

The state budget stabilization bill would increase ARPA funding for the Connecticut State Colleges & Universities system by $80 million, from $48.8 million to $128.8 million in 2024-25.

Federal pandemic aid for UConn’s main campus in Storrs and its satellite branches would grow by $57.7 million, from $11.1 million to $68.8 million. The UConn Health Center in Farmington would get $48 million in ARPA money next fiscal year, an increase of $22.3 million from its original allocation.

House Speaker Matt Ritter, D-Hartford, said the budget stabilization bill also stipulates that if an additional $40 million in ARPA funds is identified by the administration, those funds also would be transferred to higher education, with half going to CSCU and half to UConn.

Some state agencies are expected to report later this year that they could not distribute all ARPA grants as planned. Because of the complex legal reporting requirements that accompany those grants, some potential recipients have declined to accept the assistance.

CSCU Chancellor Terrence Cheng thanked state officials and “the countless students, faculty and staff who made their voices heard about the importance of investing in our institutions and their academic successes. This proposed additional funding will help CSCU address its deficit, including the recently passed agreement with [state employee unions] regarding the wage reopener for 2024-2025.”

The CSCU system was hoping to get at least $63 million extra next fiscal year to avoid further program cuts.

UConn officials estimated they need about $150 million in total to balance the books at Storrs and at the health center.

Jeff Geoghegan, UConn’s chief financial officer, said the added $80 million in the proposed budget stabilization bill “unquestionably puts UConn and UConn Health in much better fiscal positions and the university is grateful for the additional support, particularly on behalf of our students. To augment this additional support from the state, the university will continue to identify revenue enhancements and spending reductions that will be necessary to bring our budgets fully into balance for the next fiscal year.”

Higher education union leaders praised legislators for investing in Connecticut’s students. But they also said the state needs to reform its budget controls to allow funding to continue to flow into colleges and universities after federal aid has expired.

“While this is welcome first aid, the public service crisis is a chronic condition that requires real rehabilitation and recovery,” said Dennis Bogusky, president of Local 1942 of AFT CT.

“The implementation of the fiscal guardrails have had a devastating impact on students within our community colleges, from reduced resources in libraries and course offerings to slashes in essential services like ESL [English as a Second Language], disability support, food pantries and tutoring,” said Seth Freeman, President of the Congress of Connecticut Community Colleges, SEIU 1973 and a professor at Capital Community College in Hartford. “This is merely a short-term solution.”

Republicans: Legislators, Lamont, setting up CT for budget crisis

House Minority Leader Vincent J. Candelora, R-North Branford, said the bill represents a huge end run around the budget controls or “fiscal guardrails” that Lamont has supported in his comments since taking office in 2019.

Democrats conceded they didn’t formally try to adjust the preliminary $26 billion budget they adopted last June for the 2024-25 fiscal year because that plan already exceeds, by $30 million, the spending cap that keeps expenditure growth in line with household income and inflation.

In other words, the first step if that plan were to be reopened would be to reduce spending.

Federal pandemic aid doesn’t count against the cap system and can be spent outside of the budget.

That $26 billion plan also allocates about $155 million less than what the state legally is required to contribute to its pension funds for state employees and for municipal teachers.

But by carrying forward an estimated $110 million from this fiscal year’s $257 million operating surplus, legislators and Lamont can get around most of that problem as well. 

Surplus carry-forwards are another maneuver often used to circumvent the cap. Because those carry-forward dollars technically were appropriated in a prior year, they don’t count against future cap calculations when they are spent.

“There’s a complete ignoring of our constitutional statutory structure,” Candelora said. “So we talked about the fiscal guardrails and protecting them. This document, this budget ramps right through all of it and pretends that we don’t have any fiscal guardrails.”

Lamont was stuck this year between his support for the guardrails and the priorities of his fellow Democrats in the legislature.

When asked about Candelora’s charge, Chris Collibee, the governor’s budget spokesman, said, “We believe that [the bill] adheres to all constitutional and statutory caps.”

But Candelora asserted that it represented a way to get around those rules by bending them, rather than by breaking them.

The House GOP leader noted a huge amount of temporary federal money will prop up ongoing programs next fiscal year. Most of the $360 million million in ARPA assigned through this bill, and most of the $145 million assigned previously to be spent in 2024-25, involves ongoing programs.

That’s roughly $500 million that won’t be available when legislators write their budget next year. And there’s no guarantee that another $110 million in surplus will be available to carry forward again, either.

This represents a huge mess legislators must clean up, Candelora said, adding that Lamont is helping to create it.

“I think the governor has now lost the argument,” the GOP leader said. “He is the great protector of these fiscal guardrails. … Unfortunately, the governor and the Democrats decided to take the easy, irresponsible way out.”

Senate Minority Leader Stephen Harding, R-Brookfield, and Sen. Eric Berthel of Watertown, ranking GOP senator on the Appropriations Committee, echoed Candelora’s concerns. 

“Budget gimmicks are back in style under one-party Democrat rule at the state Capitol,” Harding and Berthel wrote in a joint statement. “Democrats are setting Connecticut up for failure next year and beyond. They want to spend more than state government is allowed to spend. They want to give away legislative authority. And those responsible fiscal guardrails that Republicans fought to put in place in 2017? You can kiss those goodbye. What Democrats are proposing is irresponsible and disingenuous. We urge the governor to find his veto pen.”

When asked about the potential for a huge crisis one year from now, Collibee said only that the governor would present his plan to solve the next budget in February 2025, as required by law. Officials could discuss then how or whether to replace expiring federal pandemic aid in various core services with state funds.

The state budget stabilization bill, though, does show the administration has some concerns about balancing the books over the coming fiscal year.

Lamont asked, and legislators agreed, to expand his authority to move funds around unilaterally. 

Normally, the administration must go to the Finance Advisory Committee, a panel of legislators and Executive Branch officials, when it wants to transfer more than $125,000 or 10% from one account to another. The bill raises that threshold to $350,000 or 25%.

Lamont also was supposed to find $129 million in savings from staffing next fiscal year. The bill would expand that to allow him to find savings in nearly all budgeted accounts.

Democrats: CT’s fiscal future is healthy, not dire

Still, Ritter and Rep. Maria Horn, D-Salisbury, said all is not as dire as Republicans have described it.

Though the state’s operating budget has some challenges, Connecticut’s overall fiscal picture remains strong.

A controversial program that requires the state to save — outside of the budget — a portion of quarterly income and business tax receipts is capturing huge sums of money.

State analysts say this volatility adjustment will collect $1.1 billion this fiscal year, $1.2 billion in 2024-25 and $910 million the year after that.

These funds are supposed to be used to build budget reserves and pay down pension debt. But critics say they are saving too aggressively and drawing stable revenues away from core services that need them.

Ritter said Connecticut has enough funds to solve any budget problems, balance its books and continue to pay down debt in an accelerated fashion.

Legislators pledged in contracts with bond investors to follow these guardrails through June 2028. But Horn, who co-chairs the Finance, Revenue and Bonding Committee, predicted that if these budget controls require cutting core programs even while achieving enormous surpluses, legislative support will dwindle quickly.

“I’m in favor of keeping them, but I’m also in favor of taking a look at them,” she said. “If we make them turn them into some brittle construct, they’re going to snap like five years from now. We won’t have them anymore.”

Nonprofit social services, child care get a bump up

Legislators also prioritized child care and the nonprofit agencies that deliver the bulk of state-sponsored social services for people with disabilities or patients struggling with mental health or addiction issues.

The plan would provide $50 million for nonprofits, equal to a 2.5% rate increase, next fiscal year, Walker said.

That’s a small portion of the $480 million the CT Community Nonprofit Alliance says the industry loses annually because state payments haven’t kept pace with inflation for a decade-and-a-half.

But legislators have said repeatedly over the past three years that this gap is too large to addressed in large chunks, and significant progress only can be made gradually over many years.

“Nonprofit programs have been underfunded for nearly two decades, and this increase is welcome,” alliance CEO Gian-Carl Casa said. “We also look forward to working with legislative leaders in the 2025 session to enact a much-needed update of the fiscal guardrails that have made this year’s budget process so challenging.”

The governor and lawmakers from both parties have prioritized investments in a child care industry that still is struggling to recover financially from the first year of the coronavirus pandemic.

The bill includes $18.8 million for the CT Care 4 Kids program, a partnership between the state and various child care services. It also includes $8.2 million for other early childhood development programs.

And another $26.2 million will be used to expand behavioral health services for children and other related programs.

Two Medicaid programs take a cut

But not all human service programs took a step forward in this new bill.

To help limit financial holes in the next budget, the legislature would cut two Medicaid programs.

The HUSKY A program, which serves poor children and parents, would tighten eligibility rules for adults.

The measure reduces the income eligibility limit for parents and other adult relatives caring for children from 155% of the Federal Poverty level to 133%. This year, 155% of the FPL for a family of three is $40,021 per year, while $133% is $34,340.

A second provision in the bill effectively would repeal most of a previously approved expansion for HUSKY C, the state’s Medicaid program serving residents age 65 and older, as well as people that are blind or living with other disabilities.

Legislators last year voted to expand eligibility starting Oct. 1, 2024. Rather than following a complicated eligibility formula tied to welfare payments, lawmakers instead set a limit of 105% of the poverty level. This new system also disregarded roughly about $6,100 in income a potential recipient might earn.

The stabilization bill would remove that $6,100 adjustment, effectively wiping out the bulk of the expansion.

Nonpartisan analysts say the state could save as much as $23 million annually by 2025-26.

But these changes could affect thousands of vulnerable residents, said Sheldon Toubman, an attorney with Disability Rights CT, who has spent more than three decades helping the poor and people with disabilities secure health care, employment, housing, and other basic needs.

Legislators recognized last year that Medicaid program eligibility rules are less generous for older adults and clients with disabilities. Toubman questioned why the change given big surpluses projected for the state budget this year and next.

“It’s outrageous that they are reinstating discrimination,” he said, “when they have the money to eliminate it entirely.”

The Connecticut Citizens Action Group and other advocates for expansion of the HUSKY programs called these changes “outrageous and unfair” and contrary to the recommendations of the legislature’s Human Services Committee. 

“This measure exacerbates health disparities for people with disabilities and Black and brown people,” advocates wrote.

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