Connecticut Governor Ned Lamont (D) is expected to present his biennial budget this week. What may -- and may not -- be in it?
WSHU’s Ebong Udoma spoke with CT Mirror’s Keith Phaneuf to discuss his article, “Lamont’s commitment to CT’s fiscal ‘guardrails’ is being tested,” as part of the collaborative podcast Long Story Short.
WSHU: Hello, Keith. Connecticut's landmark bipartisan budget agreement put in place spending caps, now known as fiscal guardrails, that Governor Lamont has honored in all the budgets he's presented in his six years in office. So, will this year's budget be any different, considering that the Trump administration in Washington is likely to cut back federal spending on states?
KP: Well, there's honoring, and there's honoring, and this budget may be the latter, meaning governors have been complying consistently, for example, with, let's take the best known, “fiscal guardrail,” that's the spending cap. That's the mechanism that tries to keep state spending growth in line with the growth in household income and inflation. Ever since we've had a spending cap, since 1991, every governor technically has complied with it, but we've seen lots of examples where governors find very creative ways to work around them. So one person's compliance could be another person's abject betrayal. I think Governor Lamont will find it particularly difficult not to reach for at least one gimmick or two to deal with the spending cap this time simply because he's getting pressure from all areas.
WSHU: And talking about pressure, Medicaid is a big part of this, and education and social services; everyone seems to feel that the guardrails have constrained state spending. What has helped over the past few years has been the federal money, the ARPA money, which is running out. So something has to give here, right?
KP: I completely agree. Let's take a look at just the first example you gave us, Ebong; let's take a look at Medicaid. We are already, this fiscal year, overspending our Medicaid account in the Department of Social Services by about $290 million, and the Lamont administration expects next fiscal year will need to plug that hole, plus go a lot higher. And there's fear that if President Trump convinces Congress to block grant medication, a state like Connecticut could lose tens, maybe even hundreds, of millions of dollars alone, right? There would be a huge, like, if we ended up down five, six, $700 million, you're talking 3% of the general fund just on one line item. So absolutely, there are all those problems there, but other things are also creeping out.
You know, the spending cap that I mentioned allows about $900 million of growth. If you even gave most of the state government a 2% inflationary increase, that would take up half the growth right there. Then there is growth in fixed costs that are subject to the cap, like Medicaid, like you mentioned, contributions to the teacher's pension fund, and retiree health care, which eats up almost all the rest. And we haven't talked yet about one single initiative.
Before we get to that, I want to remind everyone, every single state employee union is up for raises this year, their contracts all expire. By the way, the nursing home workers in the group home workers are technically working for private entities, but they get most of their money from Medicaid, so again, the state almost sets their raises. All those forces are coming down, and we still haven't talked about any new initiative to grow a single program.
WSHU: But we have a situation here where we've been putting a lot of money into our rainy day fund. We've been having budget surpluses over the years, and everyone seems to want to draw down on that money. Is that going to happen this year? Because we've been holding on to this money for a while now, right?
KP: Yes, we have, and I would push back in one small way. Everyone seems to want to pull back on that money, except Governor Lamont and the minority Republicans in the legislature, and I suspect right now they're still going to try, at least to open the session, to stand pat. I think as the session goes on, there'll be more pressure if, for some reason, and we really, I don't have a crystal ball if President Trump and Congress take a huge chunk of money if we're talking hundreds of millions of dollars of federal funds that Connecticut is losing, which we don't know if that will happen. We also don't know if it does happen. Will it happen by early June, when the general assembly is done?
WSHU: Well, the federal budget starts on the first of October, right? So we really won't know before. We have to have our budget in place.
KP: Well, it's not outside the realm of possibility that we could be getting indications from Washington in late spring, But your point is valid. We may not know until the summer or fall, and there's no guarantee Congress will have a budget done on time. If, for some reason, though, the bad news starts to hit the fan, so to speak, then you could see even the people who don't want Connecticut to slow down its savings efforts, even the chief defenders of the guardrails may have to say we have to spend a little more and save a little less, simply to backfill what Washington is not giving us under that hypothetical.
WSHU: Okay, but the way it looks right now, the Republicans are likely to hold the line. And the if now is whether there's some wiggle room for Lamont.
KP: That's the $64,000 question, absolutely.
