House and Senate Republicans Offer Plan to Balance ’09 Deficit Without Tax Increases and Without Draining the Rainy Day Fund

Hartford, CT – House and Senate Republicans today unveiled a plan to reduce Connecticut’s FY 09 budget deficit by $925 million through spending cuts and by accelerating the effective dates of mitigation measures contained in Governor M. Jodi Rell’s FY10 - FY11 budget proposal.  The plan significantly closes the FY09 budget gap without tax increases and without draining the state’s rainy day fund.

“Last week Governor Rell put forward a biennial budget proposal to close a multi-billion dollar deficit without tax increases and without any cuts to education or municipal aid.  She also called for the consolidation or elimination of 23 state agencies and more than $1.7 billion in direct spending cuts to jumpstart the process of reinventing state government.  Now it is time for the legislature to join in the heavy lifting,” said Senate Minority Leader John McKinney (R-Fairfield).

 “There is overwhelming public support for Governor Rell and her proposal to balance the state budget by reducing spending and rejecting tax increases.  But the Democrats failure to responsibly address the FY09 deficit will effectively render her proposal dead on arrival.  They will have rejected a plan that has broad popular support without even granting it a public debate,” said House Republican Leader Lawrence F. Cafero (R-Norwalk).

 A recent Quinnipiac University Poll found that more than two-thirds of respondents support balancing the budget by cutting government programs and services, rather than raising taxes.  82% of respondents agree with Governor Rell’s statement that “it is time to shrink the size of government.”

 “I believe that a balanced budget without tax increases is within our reach, but only if the legislature is responsible in how it addresses the FY 09 deficit, which currently stands at more than $1 billion,” said Senator McKinney.  “If the legislature follows the Governor’s lead, moves up the effective date of some of her proposed cuts and offers additional cost-saving measures, then a no-tax increase budget is achievable.  But if Democrat leaders continue to postpone making difficult decisions, run out the clock on this year’s legislative session, and instead drain the state’s $1.4 billion rainy day fund to cover the FY 09 budget gap, they will have all but assured tax increases in FY 10 and FY 11.  If the Democrats choose the latter path, their failure will continue to be counted in record job losses, foreclosures and business closings.”

The Republican plan would change the effective dates of spending cuts and other mitigation measures proposed by Governor Rell from July 1, 2009 to April 1, 2009.  The plan also anticipates $360 million in federal funding from the American Recovery and Reinvestment Act and uses approximately $280 million of the state’s $1.4 billion rainy day fund, protecting more than $1.1 billion to help stave off tax increases in FY 10 and FY 11.  See attached summary of the $925 million mitigation plan on page 4.

Protecting the Taxpayers’ Savings Account

The Republican leaders are also proposing legislation requiring a majority vote in both chambers of the General Assembly before any money in the rainy day fund is expended to cover an end-of-year deficit.  Senator McKinney has said for months that using too much of the rainy day fund too early will only exacerbate our budget crisis.

“The State of Connecticut will need most of the $1.4 billion rainy day fund to balance the FY10-FY11 budget,” said Senator McKinney.  “If Democrats rely too heavily on the rainy day fund to cover the FY09 deficit, the public should see if for what it is: an admission that they plan to raise taxes in FY10 and FY11.  Moreover, the people of Connecticut deserve to know where their elected officials stand on such an important decision.  We need to restore some level of accountability for what we do with the taxpayers’ savings account.” 

Representative Cafero said, “Our constituents elect us to represent them by voting on important issues.  It shouldn’t be acceptable to anyone that the Democrats intend to burn through $1 billion in taxpayer money without the ever taking a vote.”  

The Republican leaders again warned that the longer the legislature waits to address the budget crisis, the bigger the deficit gets and the more limited their options for dealing with it become.

“The Democrats have been deploying a ‘see no evil, hear no evil, speak no evil’ political strategy for months, and Connecticut taxpayers are going to pay a terrible price for their inaction,” said Senator McKinney.  “If we can’t make the difficult decisions necessary to balance a $1 billion deficit, how are we going to solve the even larger deficit we face over the next two years?  The legislature should be working around the clock to fundamentally reinvent state government by consolidating state agencies; finding more efficient and cost-effective ways to provide social services; and vastly reducing the scope and size of government.  So far, Democrat leaders have been unwilling to join Republican legislators and Governor Rell in those discussions.”

“Because the legislature has turned a blind eye to reality, we will soon be facing the single largest drain on the rainy day fund in state history,” said Representative Cafero.  (The biggest withdrawal to date was over $500 million in 2002).  “Literally, in the blink of an eye, more than $1 billion dollars of the taxpayers’ money will disappear with no accountability, and with no real effort having been made to stem the tide of red ink.”

About the “Rainy Day Fund”

Section 4-30a, subsection (b) of Connecticut’s general statutes provides that, at the end of the fiscal year, if the Comptroller determines that there was a budget deficit for the prior fiscal year, money in the budget reserve fund shall be deemed appropriated to the extent necessary to fund such deficit.  Thus, under current law, the transfer of money out of the budget reserve fund to cover a general fund deficit is automatic with no executive or legislative oversight.

The budget reserve fund, or “rainy day fund” as it is more commonly referred to, was first created in 1979.  That original legislation provided that monies in the fund could only be expended upon the request of the Governor and with the approval of two-thirds of each house of the General Assembly.   However, a few years later, the “deemed appropriated” language was added and the legislature was no longer required to vote.

Republican FY09 Deficit Mitigation Plan                       

Savings incurred by moving the effective date of Governor Rell’s mitigation measures to April 1st: (in millions)