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After A Trim, State Finances Looking Better

State Budget: 'Shared sacrifice' has eliminated big deficit

By BEN BARNES

August 10, 2012

The other day my barber asked me what had ever happened with the state's deficit. Did all those concessions and savings work out?

He is well-informed. He is interested in politics, even if we often disagree. His questions about the deficit reminded me that most people don't follow the state's budget situation too closely. Some may not care, or only pay attention to the big headlines about big deficits, layoffs or tax increases.

But you should follow news about the budget, and you should care. It's your money. You work hard for it, and you have every right to demand that the state do a better job of taking care of it than it has over the past 20 years. Also, the private sector is more likely to make the kinds of investments that lead to job creation if they have a sense that the state's finances are on solid footing.

Getting the facts about our state's finances now is all the more important because it's an election year, and when attacks and campaign promises take center stage, it will be much harder to separate fact from fiction.

Here are the facts:

The huge deficit that was staring us in the face on January 1, 2011, is gone. At that time, outgoing Gov.M. Jodi Rellpredicted that in the year ahead we would have $16.5 billion in revenue against $19.7 billion in spending, for a whopping deficit of $3.2 billion or 19 percent of our revenue.

This shortfall was the result of a weak economy and low tax collections, and was made much worse by the fact that the state funded $2.3 billion of the prior year's needs with one-time revenues and gimmicks. It was a great place to start a new administration — nowhere to go but up!

Gov.Dannel P. Malloyencouraged an approach of shared sacrifice. By the time the budget was finalized last summer the largest per capita deficit in the nation was closed, leaving a small surplus. This was accomplished by roughly equal measures of new taxes, spending reductions and employee give-backs.

As the 2012 fiscal year progressed, state spending was on budget despite an increase in Medicaid costs of $82 million. On the revenue side, the recession has proved to be longer and harder than anticipated. As a result, our revenue for the year was $194 million below what we expected, about a 1 percent shortfall.

We made some mid-year adjustments, including $42 million in rescissions — mid-year cuts — on top of meeting the $1.6 billion in cuts that were in the adopted budget.

When the final tallies are in, we expect to have about $100 million left to put into the state's rainy day fund.

Contrary to what's been claimed by the governor's critics, we have met the goals for savings from the labor agreement. We reduced spending across state government and cut the state workforce by 5 percent. Agencies have implemented dozens of individual savings initiatives aimed at controlling their costs. For example:

•The Department of Labor instituted a "no more paper checks" policy for its payment system, achieving cost savings of $235,000 per month or $2.8 million annually

•The new "Lead by Example" program is a three-pronged approach to reducing energy consumption in state and municipal buildings. Connecticut taxpayers will save $1.52 million per year through reduced state energy bills as a result of this 9-month-old program. Significantly higher levels of savings can be expected in the future

•Changes to state property leases and renegotiating rental rates on buildings that the state leases will save more than $900,000 in 2012.

In addition to attacking our immediate problem, we have also made real progress toward solving our serious long-term challenges.

We are on pace to convert to Generally Accepted Accounting Principles.

We expect to save $20 billion over the next 20 years because of the long-term approach we took to funding our pension liabilities through both benefit reductions negotiated at the bargaining table and sensible changes to our funding method.

And we have found creative ways to control our employee health benefits costs through better management of employee health.

So, what do I tell my barber?

After a much-needed haircut, we are looking much better, thank you.

Ben Barnes is secretary of the state Office of Policy and Management.