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Why Lamont’s spending cuts are so scarce

February 23, 2019

There’s a lot of spending in Gov. Ned Lamont’s first budget proposal, he delivered Wednesday — $21.2 billion in the coming year, with two significant new taxes Lamont would phase in over the next two years.

There are some big spending cuts, mostly in the form of restructured pension funds.

But to the dismay of some, Lamont’s budget reflects very little in the way of actual cuts in government operations.

Lamont has proposed to cut about $37 million in program spending from the first year of the biennial budget and he’s outlined $46 million in potential cuts in the second year’s $21.9 billion budget.

Most of those savings come from reducing employee overtime and leveraging nonprofit partners to provide services at a lower cost than the state can. About $12 million in the first year — a drop in the bucket compared with what we’ve seen in recent years — comes from actual program cuts.

Republicans demand deeper cuts in overall spending. Democrats, including the top leaders in the General Assembly, say that’s almost impossible to do.

The biggest roadblock, according to people in the state’s budget office, is that most of the ways the state could cut spending have already been done. And in the places that can’t be cut, such as Medicaid, pension contributions, health care and bonded debt, well, those expenses are growing.

“It’s getting to a point with the Connecticut state budget where there’s not a lot there,” said Chris McClure, a spokesman for the governor’s budget office. “There have been a lot of requests to find (cuts) and we are currently tasked with finding a consultant who will identify $500 million in savings. And I wish them the best of luck.”

The lack of program cuts illustrates a clash of two seemingly obvious realities. First: In a $20-plus billion annual budget, how can there not be ways to cut at least a few hundred million through efficiency?

But second: No one can find it. Not even those who preach cuts as the answer.

“I hear you: ‘Cut more now, Governor,’” Lamont said in his budget address Wednesday. “First of all, unlike business, I cannot say no to patients on the road to recovery at the Department of Mental Health or to children in crisis at DCF. I cannot tell the elderly that there is no room at the inn. I cannot simply shut down an underperforming department. But we can — and must — provide better service at a lower cost with a more efficient and responsive state government. That starts now.”

In fact, it’s been happening for many years. Former Gov. M. Jodi Rell brought in lean management experts to state agencies. Former Gov. Dannel P. Malloy put that plan on steroids and ended up reducing regular government agency spending by $250 million in eight years. Malloy cut thousands of state jobs.

That’s $1.25 billion if we factor in inflation. Much of that was in the Department of Correction, as the state imprisoned fewer people.

Still, budget shortfalls continue as the state’s economic growth has lagged and as pension and debt costs rise sharply.

Some savings

The governor is proposing a variety of restructuring, taxing, shifting expenses onto municipalities and, yes, even a few program cuts, to cover a looming $1.5-billion deficit. Some of the savings are contingent upon agreements with the labor unions — about $360 million, though only a tiny part of that is givebacks.

Other savings, about $49 million in fiscal 2022, comes from pushing costs onto the towns and cities, which frees up state money but doesn’t directly reduce any actual expenses.

He’s also proposed maintaining a tax on the state’s hospitals at the current rate rather than going forward with a reduction, as the health providers tax is scheduled to end on June 30. It’s not a cut, but the state won’t have to make up that revenue elsewhere.

Another change would implement an asset test for a Medicare savings program, effectively saving the state about $25 million by making roughly 18,000 senior citizens ineligible for assistance. Malloy pushed for a larger cut in that program, vetoed a bill that didn’t contain it and saw the General Assembly override his veto — Republicans and Democrats alike.

Ideas scarce

Republicans are arguing for more cuts to state programming and operations. The problem is, they don’t have a lot of suggestions.

Senate Minority Leader Len Fasano, R-North Haven, was disappointed by the lack of cuts in the governor’s proposal, and offered a few suggestions for savings that have been considered in the past but never gained support. Cutting from UConn Health, specifically John Dempsey Hospital, and increasing transparency in the state’s quasi-public agencies, for example.

“I’m just suggesting that is something this new administration can take on and say, ‘We need to pull back on this,’” Fasano said.

He admitted that cutting spending isn’t as simple as it sounds.

“I think it’s difficult to cut spending for a lot of different reasons,” Fasano said. “We have programs that we enact that people depend upon and changing a program could adversely affect a family that is planning their budget. But that doesn’t mean you can’t wean people off. There are other programs that you can go through and say, ‘We can hold back on this and hold back on that.’”

As for what those might be, he didn’t know.

Speaker of the House Joe Aresimowicz, D-Berlin, estimated there 12,000 fewer state employees, full-time and part-time, than there were at the beginning of Malloy’s administration eight years ago.

“I said on opening day that the easy cuts were gone,” Aresimowicz said Wednesday following the governor’s address at the Capitol. “We sat in a room for 15 months to come up with $400 million additional in cuts. Now they’re saying it’s not enough, what he’s done? Well, let’s go back to the table then. Again, let’s not have press conferences, let’s have conversations.”

“Okay,” House Majority Leader Matt Ritter said to Republicans, “what are your cuts? I can’t wait to see them. Let me know.”

That’s what the next three months of deliberations will be. If history is a guide, no one will produce much in the way of cuttable programs.

“I’ve never seen a budget that can’t be cut somewhat,” said Bob Stefanowski, the Republican business executive who lost to Lamont in November and campaigned on promises to slash state spending. “You take out everything you can and then, and only then, do you go to the taxpayers. I know it’s a tough situation. I’m not trying to mitigate the problems that he stepped into, and I’m sure they’re bigger than he even thought. But the immediate reaction should be, ‘Where can we fundamentally take out costs?’”

Stefanowski, who has no government experience, called several of the governor’s proposals “smoke and mirrors.” He cited Lamont’s proposal to eliminate the business entity tax — a $250 fee businesses pay every two years — but raise the annual filing fee for partnerships from $20 to $100.

It looks like a tax cut, but the net savings to affected businesses is about $45 per year.

But like his Republican contemporaries, Stefanowski, too, could not think of areas for major savings.

Lamont is clear. His budget is a starting point. He’s ready for collaboration and open to suggestions, because, as he’s quickly learned, it’s not easy to find savings in state government.

“Together we can take this fiscal challenge and turn it on its head,” he told the joint session of the General Assembly. “The budget we have put together is far from perfect and I welcome your input.”

kkrasselt@hearstmediact.com; 203-842-2563; @kaitlynkrasselt