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CT News Junkie - Malloy Administration Advocates Fiscal Constraint

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By Christine Stuart

Gov. Dannel P. Malloy's budget director wrote lawmakers Thursday to tell them if there's a budget surplus in this year's budget then it will go into the Rainy Day Fund.

Office of Policy and Management Secretary wrote all six legislative leaders and told them that if they end the year with a budget surplus based on Generally Accepted Accounting Principles then the administration wants to put the money in the Rainy Day Fund. Currently, Barnes is predicting the state will end the year with a $2.8 million surplus on a cash basis, but there's still a $44.7 million deficit when the numbers are projected under GAAP, so the letter may be a bit premature.

In his letter Barnes explained that if there is a surplus it's likely due to the fiscal cliff debate in Washington which caused "many well-off taxpayers to shift income and wealth transfers into 2012 that otherwise would have occurred the following year, in order to reduce their tax liability."

Barnes warned lawmakers that it could amount to a one-time revenue increase so no one should get too giddy over the prospects of a surplus.

"Until an updated revenue estimate for FY 2014 and FY 2015 is completed, we should remind those that have an eye on any surplus that we are in a very different time from the years before the recession when prosperity drove surpluses every year," Barnes said. "Today, we are not yet in a position to predict with sufficient confidence that economic recovery will produce lasting increases in revenue collections."

But Republican Senate Leader John McKinney said he's not immediately convinced that putting the money in the Rainy Day Fund would be the best use of a surplus. McKinney said the legislature should look to use any surplus to offset the cuts in municipal aid or the cuts to hospitals.

At a press conference Friday Malloy said flatly "no" to the suggestion.

"If we spend the money that came in as a result of the cliff this year, it will not be available next year," Malloy said.

He said the same thing happened in 2010 when it was unknown whether the Bush tax cuts would be extended. It wasn't to the same extent as this year, but Malloy said it was significant and it made states think the economy was recovering at a faster pace than it was.

"Thats why we have to stay the course. Be fiscally conservative with respect to that money," Malloy said. "The answer is no. Don't go out and spend it."

But McKinney said Malloy was just trying to get some good publicity.

"The governor is trying to get out in front and proclaim good news when his budget is just bad news," McKinney said.

He said he would like to look at using the money to offset reductions in municipal aid, which could increase property taxes at the local level, or the $550 million in hospital cuts.

A spokesman for Sen. President Donald Williams said he supports the governor's proposal to set the money aside in the Rainy Day Fund.

House Speaker Brendan Sharkey said the conversation is a little premature.

"I appreciate Secretary Barnes' recommendation and welcome the positive news on the current year budget. It will certainly be a topic during upcoming budget talks with the administration but it's a bit early to commit to specifics."


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