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February 24, 2015

Malloy's budget illegal, $54M over spending cap

HBJ PHOTO | Brad Kane Gov. Dannel P. Malloy's budget team miscalculated inflation by $60 million for the next fiscal year and must find new ways to cut the budget.

The Office of Policy & Management admitted Tuesday it miscalculated the spending cap for Gov. Dannel P. Malloy’s proposed budget and now the governor and his team have to find another $54 million to cut in the first year of the two-year, $40 billion budget.

The spending cap was introduced 24 years ago and is designed to keep state spending in line with inflation. In approving the final budget, the legislature can choose to go over the spending cap, which happened under Malloy’s predecessor Gov. M. Jodi Rell three times in fiscal years 2006, 2008, and 2009.

Malloy, who hasn’t asked to go over the spending cap since taking office in 2011, proposed a budget on Feb. 18 that was under the cap by only $6.3 million in fiscal 2016.

On Tuesday, Malloy’s budget guru – OPM Secretary Ben Barnes – released a statement saying his office miscalculated the spending cap by $60 million dollars. Barnes said OPM used a new outside vendor that used the wrong dates to calculate inflation for the budget, arriving at an incorrect growth rate of 2.98 percent instead of the correct 2.58 percent.

Because the growth rate shrank, Malloy must find a way to get his proposals back under the cap, which would require another $54 million in cuts.

The proposed budget already increases the tax burden on business by extending the 20 percent corporate tax surcharge, which is expected to bring $44 million in revenue in fiscal 2016. The budget also calls for an increase in the solid waste disposal fee from $1.50 to $2.50 per ton and to expand it to cover all types of garbage disposal, as a way to increase recycling. Those changes are expected to generate an additional $5.3 million annually.

Barnes said his team will work the the Office of Fiscal Analysis to find the adjustments necessary to get back under the cap.

The second year of Malloy’s proposed budget will not be impacted by the inflation adjustment. His proposals for fiscal 2017 already were $135.8 million under the cap. Even with the revision, that fiscal year still would be below the cap by $80 million.

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