Connecticut lawmakers have three weeks to pass a biennial budget. How are things looking?
WSHU’s Ebong Udoma spoke with CT Mirror’s Keith Phaneuf to discuss his article, “One skirmish over the CT budget is over, but the big battle looms,” as part of the collaborative podcast Long Story Short. Read Keith’s story here.
WSHU: Connecticut has a huge surplus, yet we have a situation where there's a big debate about what to do with the budget and how to make things work in the out years. Why?
KP: Why is it not so cut and dry? Well, what we're really have going on behind all of this is a fundamental debate over how much one generation, the current generation, should be paying to solve a problem created by three or four that came before it. That was the group that really created the pension debt that made headlines, national headlines about Connecticut, all throughout the 2010s. We still owe about $35 billion to our pension funds, benefits we've promised to people, but we haven't saved for. The State has a plan to gradually pay all that down through about the early 2050s, but we're using our budget caps and budget controls to generate huge surpluses. And I almost hate to use that word because it implies that money is not needed for these programs. We're actually leaching dollars out of education, health care, social services, transportation, everything else, and we're using it to make extra pension payments. Some folks have said we've overcorrected, and one generation is now paying too much. But that is why, that's the shortest answer I can give you, why we would have a huge surplus. We can't decide if there's enough money for everything else. It's because we're trying to create huge surpluses to pay down pension debt.
WSHU: Now, I sensed a lot of frustration from House Speaker Matt Ritter (D) last week that the budget negotiations were not going well. Why? What was the issue here?
KP: The reason they're not going well is, again, it goes back to this dynamic that I was just discussing with you. What's happening is we are getting to a point where these budget caps that really have been in place in their current iterations, their current settings since about 2017 are becoming unbearable. And some folks may say, 'Well, what changed? Why is this program that's leeching money out of everything else? Why is that becoming too hard to bear now, if it's been in place since 2017?'
The reason for that is that we have had, I don't want to call it good fortune, because it's related to a pandemic that killed so many people. But because of the pandemic, Connecticut received billions of dollars in emergency federal grants. We know them by the acronym ARPA, American Rescue Plan Act funds, and think of it almost as fiscal novocaine, while we were extracting all this money from the budget via the guardrails by the budget caps to make pension contributions. We had this emergency money that we could spend outside of the cap system, outside of the budget, to take the place of the money that the budget caps were removing. So you didn't feel the loss of all that money. Well. Now these ARPA dollars have been exhausted, and for the first time, Connecticut is learning what it is like to take eight to 10% each year out of its budget and set it aside for extra-special pension debt reduction payments. And it's very, very painful.
WSHU: Now, on top of that, we have a situation with the Trump administration in Washington cutting back on a lot of money that was coming, apart from the fact that the ARPA funds are gone. We now have the regular funds, like Medicaid, for instance. The talk is about cutting that back, and the state would have to make up the difference. How are they trying to deal with that?
KP: That is the double whammy of all double whammies, because the problems that we're facing immediately, right now with Medicaid, don't even deal with Congress and President Trump. That's simply the fact that demand is much greater than we anticipated. As you point out, though, Ebong, we have a whole other problem to deal with this summer or early this fall. Once Congress and President Trump finish cutting the federal budget, we anticipate losing hundreds of millions of dollars, at a minimum, in Medicaid funding, and that's going to be a whole other problem. I don't think the math works any way other than simply scaling back these budget caps and not trying to pay down pension debt as fast as we currently are. That's not a moral judgment. That's literally just doing the math. I don't see where you come up with the money any other way. And I should have also mentioned, even at the pace that we're paying down pension debt.
Now, some folks have said, well, isn't it worth it? In a couple of years, this problem will be over. That's not the case, even with all the extra money we've poured into our pension funds. The estimate now is maybe we'll have this problem solved instead of the early 2050s maybe by the mid 2040s The problem is just too big to obliterate quickly, meaning it's one thing to say, well, can our social service and healthcare and municipal aid and K 12 school programs suffer for a year or two? No, we're really asking, can they suffer for a couple more decades and then we'll stop leeching all this money out to pay down pension debt. That's the other problem you don't hear a lot of in the debate, which is, this is not a problem we're going to be done with overnight, even if we keep the guardrails and the budget caps at their current settings.
WSHU: Okay. And the thing about the budget caps is that Governor Lamont, who is a Democrat, is being backed by the minority GOP in saying they don't want to move those guardrails, and the Democrats, who are in the majority in the legislature, want to do so. Is there room for a compromise? There has to be some type of compromise to get a budget deal, which we need in the next couple of weeks.
KP: That's a good way to put it. You know, sometimes there has to be a compromise. We saw earlier this session, the Democratic and Republican legislators compromise and award special education money to towns, even though both parties knew it was going to push this current fiscal year's budget over the spending cap, because Republican districts were losing money in their schools because of special education costs, just like Democrats were losing it. I think as the finances get too tight, folks who say, no, I want to leave things just the way they are, are going to realize it's okay to do that again.
For the last few years, when there was all this federal ARPA money, it's like, Oh, you just lost $10 to the guardrails. Here's $8 that came from Washington and ARPA funds. Now it's not so painful. Now you lose $10 and there's nothing to offset it. I think that's going to force this situation. Quite frankly, if Governor Lamont, and we don't know, but if he does choose to run for a third term, he may also have to do something, because it's going to be very hard to avoid a nursing home strike later this month if he does not loosen the guardrails. Some, not impossible, but it's going to be increasingly difficult if he doesn't try to carve out more money.
WSHU: Wow. Okay, so the bottom line here is that something has to give.
KP: It's just the math. People can, you know, sort of form different political alliances, but the numbers just don't care. Okay, at some point, the dollars and cents have to add up.
