Team Analysis: Dan Malloy’s State Budget Proposal (Updated)

This column appears in the March 2 – 9 edition of the Hartford News.
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Policy Watch:  Overview of Gov. Dan Malloy’s Budget 



The budget “seeks $1.5 billion in labor concessions,” according to the CT Mirror. Unionized state employees would have to offer concessions of $700 million next fiscal year and another $800 million in 2018-19.  


State budget director Ben Barnes claims that the only alternative would be to lay off at least 4,200 employees.  The CT Mirror declared that based on the legislature’s Office of Fiscal Analysis’ savings estimates from last spring, the state may need to layoff twice that number in order to reach $800 million in yearly savings.  




Other than the start-up money that expires in 2020, Barnes claims that there are no funds to cover Malloy’s major transportation initiative which was announced two years ago. This continues to postpone projects like the I-84 and Route 8 junction in Waterbury and the replacement of I-84’s elevated section in Hartford. 


However, Malloy is willing to request an issuance of bonds to renovate the XL Center in Hartford to the tune of $125 million. The CT Mirror notes that the expected total cost for this renovation is $250 million. Why is finding $250 million for the XL Center possible, but education, labor and healthcare services have to be cut? Here’s one little breadcrumb link: one of the biggest donors to the CT Democrats in 2013 was Ed Snider, who passed away in 2016. Snider was the chairman of Comcast Spectacor, the company that manages the XL Center. The state provided $35 million for XL Center renovations in 2014.





The CT Mirror calculates that public colleges and universities, which have suffered large cuts since the 2008 recession, will have their block grants reduced by 4.5% on average. 


The plan also directs $230 million in education grants to 52 municipalities with struggling schools. However, it will be up to the municipalities to decide if they use those funds for education or not. The 30 worst performing school districts will be legally allowed to reallocate only funds that are in excess of their budget.  


How will Harford use those funds? Of the $38.1 million of increased state aid that Hartford is proposed to get, $12.2 million of it comes from education grants. The CT Mirror reports that when asked about how he’d use that state aid, Mayor Luke Bronin said he would use it to help bail out the city’s finances.  


Other municipalities may use that state aid to pay their portion of the teachers’ pension fund. That’s because Malloy’s plan would make municipalities pay one-third of the employer contribution for the fund. The administration estimates it would save them $400 million.  





Limit access to HUSKY A (cuts $11.8 million)

In order for parents of minor children to get Medicaid, they have to earn up to 138% of the poverty level, instead of the current 155%. As an example, the income limit for a family of four would drop to $33,534 from the current limit of $37,665. If this cut passes, it would be the second cut to the income levels in three years. 


Admission Freeze in the CT Home Care for Elders Program. (cuts $10.5 million)

Under the proposed plan, Malloy would continue the 2015 admission freeze imposed on Category 1. Category 1 is for people who are at risk of being hospitalized or temporarily placed in a nursing home if they don’t receive help. In addition, there would be an admission freeze to the program’s Category 2 starting on July 1. A new person would be able enroll only if someone left the program. Category 2 helps people who require a nursing home but their finances put them above the Medicaid qualification limit.


Municipal Tax on Nonprofit Hospitals (cuts $55.8 million)

Currently, municipalities with nonprofit hospitals receive state funds to cover losses in property tax revenue. To eliminate this funding, Malloy proposes to allow municipalities to charge the nonprofit hospitals a property tax. To offset this new cost to hospitals, the administration would give them supplemental Medicaid payments totaling $250 million.  


However, these hospitals say they will fight against a proposal that makes them subject to property taxes. Moreover, the situation with Medicaid in Washington, D.C. is very uncertain, and hospitals could be left to cover the costs, which would mean higher healthcare costs for citizens. 


Additional cuts to Hospitals

The plan also cuts an $11.8 million fund that supports small, independent hospitals. 

Even more frightening is that the plan also gives the administration the power to cut more than $120 million in hospital funding if there’s a budget shortfall.    


Defunding & Privatizing Mental Health Services (cuts $15.5 million)

Malloy’s plan cuts grants for mental health, substance abuse services and employment opportunities by $4.7 million. Malloy argues that these grants shouldn’t be needed anymore because more people get coverage through the federal health law. Providers, however, say many clients still don’t have insurance and that the Medicaid rates are less than actual costs. These providers would not be able to bill more in order to cover the lost grants. This would cause them to close programs or stop taking new clients. Moreover, let’s not forget that coverage will surely be affected by the impending repeal and replace efforts against the Affordable Care Act.    


By privatizing certain mental health services, the administration plans to save $7.5 million. Malloy claims this won’t result in layoffs or service cuts because workers in outsourced programs could fill the DMHAS vacancies. Additionally, the plan reduces funds to the Connecticut Mental Health Center in New Haven by $1.2 million.


Lastly, Malloy wants to “relocate”a 21-bed detox program from Blue Hills Substance Abuse Services in Hartford to Connecticut Valley Hospital in Middletown, which, according to the administration, would lead to $2.1 million in savings and no loss in services. Where will Hartford patients go? A DMHAS spokesperson told WNPR that the agency will “look at” providing Hartford residents with transportation to CVH – so there’s no promise of access, yet both Malloy and DMHAS claim that there is no loss of services, only “relocation”. Hartford clients also would have to cope with the loss of their support system, as many family members, loved ones and friends would be unable to visit clients in Middletown due to a lack of transportation. Visitors bring clients clothing, other items and provide emotional support. Isolation leads to relapse. CVH management has indicated that Blue Hills workers would be absorbed into existing state positions. How real is this promise? Malloy has threatened to lay off as many as 4200 employees, if they do not agree to  wage and benefit concessions for the third time since 2009.    




Helping the Wealthy 


$20.1 million in revenues would be lost under Malloy’s plan because he wants to lower the estate and gift tax. It also proposes reducing the lifetime cap on taxes an estate pays from $20 million to $15 million. In three years, the CT estate tax would match the federal exemption level. 

However, Connecticut has one of the largest economic gaps in the nation between the top 1 percent and the bottom 99 percent. According to a January 26, 2015 report by Economic Analysis and Research Network, Connecticut’s top 1 percent had an average real income growth of 35% between 2009 and 2012. In alarming contrast, the bottom 99 percent had an average real income growth of -5.4%. In 2012, the average income of the top 1 percent was $2.7 million while the bottom 99 percent earned an average of $52,600. 

These $20 million dollars, which the wealthy currently pay, could go a long way in limiting cuts in healthcare, education or labor. Yet, Malloy is more interested in having the wealthy keep even more of their money in their coffers. 


What is Malloy’s stance on taxing the rich? The Hartford Courant reported the following on February 8, 2017: 


“One of the criticisms …. we will hear … is that we are punishing X, Y and Z — you can name whichever constituencies you like that don’t do well under this budget but we’re not taxing the rich and taxing big corporations,” Barnes told reporters.


While acknowledging that liberals seeking such an approach have “a legitimate argument,” Barnes said excessive taxes could hurt the state’s long-term fiscal health.


“One of the things that’s really driving the difficulties we’re facing right now is an extraordinary slow-growing economy,” Barnes said. “The lesson of 2015 is that the easy answer of going to taxes on corporations and on business has significant negative repercussions for the state as well.”

Next week we will take a look at Minnesota, where Gov. Mark Dayton taxed the rich as part of a budget plan that erased a $6.2 billion deficit and 7% unemployment rate, turning the state’s economy into one of the best in the nation.


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