October State Budget Update

The State Legislature has grappled with the task of adopting a full biennium budget since February and was unable to successfully adopt one by the session’s end in June. This year’s unusual, chaotic, and contentious budget process began with the Appropriations Committee failing to get their proposal out of committee for the first time in decades. There was a short-lived attempt by Senate Republicans to enact a budget on the last day of the regular legislative session, but in the end not a single proposal was brought to a vote. The session was defined by close numbers between caucuses, particularly in the evenly divided Senate. During Special Session in October the narrow divide allowed Republicans to garner enough Democratic support to pass one of their proposals through both chambers. Although it was eventually vetoed by the Governor, this overtly demonstrated the changing dynamic in the General Assembly.

As the legislature went into special session in June, they were able to formally adopt the SEBAC agreement. The deal provided expenditure relief to the tune of $1.57 billion over the biennium in exchange for layoff protection and other benefits to the state employees union. The concessions from the union were essential to budget proposals from the Democrats and Governor Malloy. The agreement passed in the Senate after three moderate Democrats (Senators Hartley, Slossberg, and Doyle) voted in favor of it in exchange for structural fiscal reforms that they asked be included in any final budget. When reforms were not as expansive as they advocated in a September proposal, the three voted in favor of a Republican budget instead. When a number of House Democrats also split and voted for the Republican proposal it passed in the House 77-76. The bill was ultimately vetoed by Governor Malloy and was not reconsidered for veto override.

Teacher pension costs, ECS funding, municipal aid, hospital tax and Medicaid reimbursement are at the center of the debate now, as they have been since February. The Governor is unilaterally controlling the State’s spending in the absence of a biennial budget. Meanwhile, municipalities have declared they are running out of cash and the capital City of Hartford is teetering on the edge of bankruptcy. Both Mayor Bronin (D-Hartford) and Mayor Harp (D-New Haven) have said they will run out of cash by November without State aid. The City of Hartford has already been downgraded several times this year by Wall Street bond rating agencies.

Legislative Leadership is now meeting nearly daily in bipartisan negotiations amongst themselves and with the Governor’s office. Alternative approaches to solving the dilemma have come in the form of Mini-budgets and piecemeal plans to vote on separate budgetary provisions, but so far all have failed. Into mid-October reports on bipartisan talks have been optimistic, but lawmakers have acknowledged that after October 13th passing a budget before the 2018 session begins in February becomes incredibly difficult. As legislators embark on honeymoons and the Holiday season nears, any proposal in after October 13th would need to garner bipartisan support to get the votes necessary for passage.

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