The Connecticut General Assembly generates a two-year (biennial) budget every odd-numbered year which begins in the Executive Branch, when the governor each state agency to prepare draft budgets for the following biennium. Over several months the governor’s budget office, the Office of Policy & Management (OPM), compiles this information, makes changes, and then works to match the agencies’ spending projections with revenue.
The result, often referred to as the ‘governor’s budget,’ is delivered to the General Assembly in a formal address by the governor in early February. The annual budget address often includes policy initiatives, spending proposals, and vehicles through which additional revenue may be generated. In the address, the governor identifies his priorities for the biennium.
When the legislature convenes, members of the General Assembly go through a similar process. Joint Committees (consisting of state senators and representatives), chiefly, the Finance, Revenue, and Bonding Committee oversee the revenue side of the state budget, which includes fees and taxes. On the spending side, the Appropriations Committee handles matters regarding state agency budgets and other state spending. When the Appropriations and Finance Committees approve a budget, it is often different from the governor’s. The two versions are negotiated into the final budget language and the budget must be voted on and passed by both the House and Senate and signed into law by the governor.
May through July:
Agencies/commissioners prepare biennial budget projections.
June 30/July 1:
Fiscal Year ends/New Fiscal Year begins.
State agencies and commissioners budget request instructions
Biennial budget requests due.
September through January:
OPM reviews recommendations and prepares proposed ‘governor’s budget.
Governor transmits budget to General Assembly.
February through May:
General Assembly convenes, holds hearings, debates and makes adjustments.
May through June:
Reconciliation of governor’s budget with General Assembly budget.
State spending is roughly $10,000 per household, while the state debt per capita is $27,539.70.
The current fiscal year projects spending of nearly $3 billion in direct aid to the state’s cities and towns through a variety of grant programs. The vast majority of that funding is channeled through the Education Cost Sharing (ECS) grant to help finance public education. Other primary municipal grant programs include: the Excess Cost Grant, designed to mitigate the high cost of special education mandates; Town Aid Road (TAR) Fund, which helps maintain local streets and roads; and Payments In Lieu of Taxes (PILOT), which compensates local governments for hosting tax-exempt institutions like not-for-profit hospitals and state-owned buildings that don’t pay local property taxes. A popular grant, The Small Town Economic Assistance Program (STEAP) funds economic development, community conservation and quality of life projects in rural and suburban towns.
“Municipal grants are awarded on a sliding scale based upon criteria including the economic status of the city or town, the income level of its residents, and the worthiness of specific infrastructure improvement projects.”
Medicaid accounts for much of Connecticut’s spending and is currently driving a budget shortfall, according to DSS spokesperson David Dearborn. As a result, the biggest cuts are coming from Medicaid to fix that deficit. Governor Dannel Malloy announced $170,444,693 in statewide budget rescissions this past week; $32 million of it is from the Department of Social Services, $8 million from the Department of Education and $1 million from the Department of Economic and Community Development. The biggest cuts from DSS include housing and homeless services which is close to $3 million and $5 million from TANF. However, according to DSS spokesperson David Dearborn the cuts represent real services with real effect on people from Medicaid. Those budget cuts are intended to help slash an estimated $365 million from the state deficit.
Since 1978 Connecticut has had a Budget Reserve Fund, more commonly referred to as the Rainy Day Fund. The fund was created to help close fiscal year-end budget gaps. The Rainy Day Fund is currently depleted, when it was used to help balance the FY 10-11 budget. In the past few years, state government has spent more than $900 million in emergency federal stimulus aid as well as a nearly $1.4 billion emergency budget reserve, and the entirety Rainy Day Fund. Connecticut operates from a common pool that mingles tax revenues, federal grants and receipts from fees and licenses with borrowed funds. With the governor’s approval, state law permits the treasurer’s office to temporarily transfer funds between operating and capital programs, which has done so in emergencies when bills exceed tax and other operating fund receipts.
In regards to the current budget situation, Treasurer Denise Nappier has informed the governor: “For several months I have reported reduced cash levels for the state, particularly within the common cash pool that funds daily operations and circumstances now warrant a contingency plan for ensuring adequate cash resources.” Because of technicalities in state budgeting rules, Comptroller Kevin Lembo’s office could not count the emergency budget cuts ordered by Malloy; in his latest report, Lembo officially certified a $415 million deficit, though he acknowledged that the actual shortfall is probably closer to $290 million. Whenever the comptroller’s office certifies a deficit larger than 1 percent of the general fund ($19.14 billion), state law requires the governor to submit a plan to the legislature. The current threshold is such that it will trigger the statutory requirement, forcing Malloy to present a plan to the General Assembly in special session.
The comptroller attributes much of the shortfall to an increase in Medicaid spending. “Medicaid — the largest single gross appropriation line-item in the budget — is significantly above the budget target,” Lembo said. “Caseload growth continues in the low-income adult program area with the addition of more than 4,000 clients since the start of the fiscal year” causing “double-digit increases [which trend into] this fiscal year, according to data from the Department of Social Services.” Lembo adds that “The fiscal year 2013 budget relied on over $100 million from Medicaid program savings initiatives, many of which have not been implemented to date.” 
Rather than raising taxes from the outset, Governor Malloy has made cuts across nearly every agency request that has come his way, and has mandated the adoption of Generally Accepted Accounting Principles (GAAP) “In order to improve the state’s accountability for its use of public funds.” Executive Order No. 1, which directed the Secretary of the Office of Policy and Management (OPM) to initiate a process intended to result in the implementation of GAAP, was his first act upon taking office.  Malloy has faced criticisms by labor and citizenry for his cuts, but they have come, thus far, on the revenue side, without an increase in taxes. “First we downsized government. Then we cut spending. Then we identified what we need to ask state employees to do. Only when those three processes were complete did we begin to look at revenue.”