OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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EMERGENCY CERTIFICATION

SB-2101

AN ACT CONCERNING A DEFICIT MITIGATION PLAN FOR THE FISCAL YEAR ENDING JUNE 30, 2010.

OFA Fiscal Note

State Impact: See Below

Municipal Impact: See Below

Explanation

The bill makes modifications and revenue adjustments to the FY 10 budget. The various changes will result in a $39. 8 million net reduction in the anticipated FY 10 General Fund deficit. The table below identifies $12. 4 million in General Fund expenditure reductions and $27. 4 million in increased General Fund revenue.

FY 10 General Fund (GF) Expenditures and Revenue Changes
Section		Amount
	Expenditure Savings:
1	Reduction in FY 10 Appropriations	$9,078,172
8-10,11,14	Other Expenditure Savings	3,360,000
	Subtotal Expenditure Savings	$12,438,172
	Increased Revenue:
3,4b-7,15	Transfer from Funds/Accounts	$23,153,535
2,10,16	Revenue Change due to Changes in Expenditures	4,209,649
	Subtotal Increased Revenue	$27,363,184
	Total FY 10 GF Impact	$39,801,356

FY 10 Deficit - OFA's projected FY 10 deficit as of 11/13/09 was $385. 9 million. Passage of this bill will reduce the FY 10 GF deficit to $346. 1 million. In addition, Emergency Certification HB 7101 (AAC the Estate and Gift Tax) would further reduce the GF deficit to $269. 9 million. It should be noted that the Governor's Deficit Mitigation Plan included $84 million in reductions to the deficit that do not require legislative approval and therefore are not addressed in the bill or the fiscal analysis.

As a result of the bill's changes to FY 10 appropriations, the state budget will be under the spending cap by $839. 8 million.

Below is a section by section explanation of the fiscal impact of the bill.

Section 1 reduces General Fund appropriations for FY 10 in various services and accounts by $9,078,172. The table below identifies the various programmatic impacts.

Section 1 Reductions to Appropriations Include:	FY 10 Reduction
Auditors - De-appropriate Funding in Lieu of Recisions	$603,355
CCT - Reduce Culture Tourism and Arts and Basic Cultural Resources by 5%	171,500
CCT - Reduce Line-Item Grants by 5%	429,078
CCT - Suspend Funding for the Film Training Program for 1 yr.	154,167
DCF - Suspend New Funding for Enhanced Care Coordination	120,000
FOI, Elections, Ethics De-appropriate Funds to Watchdog Agencies in Lieu of Recisions	164,814
DECD – Reduce Funding for Main Street Initiative	9,000
DECD - Reduce Funding for the CT Center for Advanced Technology (CCAT) Manufacturing Supply Chain Program	19,000
DEP - Reduce Reimbursement for Underground Storage Tank Program	500,000
DHE - Reduce Funding for Education and Health Initiatives	150,000
DHE - Suspend Funding for Washington Center	1,187
DHE - Reduce New Funding for Americorps	87,500
DOL - Suspend Funding for Individual Development Accounts (IDAs)	50,000
Debt Service - Delay Supportive Housing New Starts Until FY 11. (total $1,774,000 due to delay = $1m Debt Service + DSS $264,000 + DMHAS $510,000 (DMHAS savings reflected in section 9)	1,000,000
DSS portion of delay supportive housing	264,000
Commission on Fire Prevention - Reduce Grants by 5% and Fire Fighting 1 to FY 09 actual expenditure level	173,640
OPM - Reduce Funding for Leadership, Education, Athletics in Partnership (LEAP) by 25%	30,128
OSC - Misc. - Reduce Funding for Interstate Environmental Commission	48,782
OTT- Suspend the Child Care Facilities Loan Fund Program for New Projects	3,500,000
SDE - Reduce Interdistrict Cooperative Funding	1,000,000
SDE - Suspend Connecticut Writing Project	50,000
SDE - Suspend Funding for Readers as Leaders Program	60,000
Various – De-appropriate Equipment Funding	11,811
Military Dept - Eliminate 1 of 2 Gov's Horse & Foot Guard	76,500
Board of Firearms Permit Examiners - Efficiencies due to transfer agency to DAS (maintain Board)	38,710
Reduce DEP GF Funding for Harkness to reflect shifting to non-appropriated account (see sections 4 & 16)	365,000
TOTAL – Reductions to Appropriations in Section 1	$9,078,172

Section 2 transfers a total of $47,147,500 from the Department of Social Services' (DSS) hospital grant accounts to the Medicaid account. DSS will use these funds to increase Medicaid hospital rates. Currently, the funds in the grant accounts are reimbursed at a 50% rate under the federal Disproportionate Share Hospital (DSH) program. Due to the federal stimulus program, most state expenditures under the Medicaid program are now reimbursed at an approximate rate of 61% by the federal government. Should the federal government allow the increased rate of reimbursement to be applied to these new hospital rates, the state would realize additional federal revenue of $5. 2 million in each of FY 10 and FY 11.

Sections 3, 4b - 7 and 15 make the following fund/account transfers to the General Fund, totaling $23. 2 million:

FY 10 Fund/Account Transfers to the General Fund
Section	Fund/Account	Amount
3	Citizens' Election Fund	$5,000,000
4b	Department of Environmental Protection – (for a breakout of the various accounts see section 4b below)	9,374,635
5	Public, Education, Government Programming Account	2,300,000
6	Tobacco and Health Trust Fund	5,000,000
7	Emissions Enterprise Fund	1,000,000
15	Community Investment Act	478,900
	Total GF Impact	$23,153,535

Section 4a transfers $2. 3 million from the Conservation Fund to the maintenance, repair and improvement account established in Section 16 of the bill.

Section 4b transfers $9. 4 million from various Department of Environmental Protection funds/accounts and credits this amount to the resources of the General Fund for the year ending June 30, 2010. Of this $9. 4 million transfer to the General Fund, the following amounts are transferred from the following sources:

FY 10 DEP Account/Fund Transfers to the General Fund
Conservation Fund	$2. 9 million
Environmental Quality Fund	3. 5 million
Clean Air Act account	3. 0 million
Total DEP Transfer	$9. 4 million

Section 8 allows the Department of Administrative Services (DAS) to join existing cooperative purchasing contracts. Currently, DAS can enter into cooperative purchasing contracts at the outset of the cooperative contract solicitation. It is estimated that this provision will reduce state contracting costs by $100,000 in FY 10. The annualized statewide savings may exceed $1. 0 million on the purchase of goods and services.

Section 9 delays round 3 of the Next Steps Initiative (supportive housing) for FY 10. This delay is expected to save a total of $1,774,000 in FY 10. Of this total, $1. 0 million in appropriations in Debt Services is reduced in section 1; $264,000 in appropriations in the Department of Social Services is also reduced in section 1, and $510,000 is anticipated savings in the Department of Mental Health and Addiction Services.

Section 10 increases the current premium requirements for enrollees in HUSKY B, Band 2. The premiums will increase from $30 to $40 per month, per child, while the monthly family cap will increase from $50 to $62. 50. This change is expected to result in a state savings of $370,000 in FY 10 and $750,000 annually thereafter. Due to the 65% federal reimbursement available under SCHIP, this change will result in a concurrent federal revenue loss of $240,000 in FY 10 and $487,500 annually thereafter. Therefore, this is anticipated to result in a net state savings of $130,000 in FY 10 and $262,500 annually thereafter.

Section 11 reduces the $5. 0 million carry forward funding for Operation Fuel by $2. 0 million. These funds provide heating assistance to individuals between 151-200% of the federal poverty level for both primary and secondary heating sources.

Sections 12 - 13 transfer the Board of Firearms Permit Examiners to the Department of Administrative Services (DAS). Funding of $8,971 in Other Expenses is transferred to DAS to support the Board. Section 1 includes a reduction in appropriations of $38,710 in the Board of Firearms Permit Examiners to reflect the elimination of one non-union position due to the transfer.

Section 14 reduces by $380,000 the carry forward funding for the Housing Incentive Zone (Home CT) program. The reduction includes: 1) $319,200 to the Office of Policy and Management; and 2) $60,800 to the Department of Economic and Community Development.

Section 16 creates the maintenance, repair and improvement account. This results in a reduced appropriation (included in Section 1) to the Department of Environmental Protection (DEP) of $365,000 in FY 10 since this program is now supported by the new nonlapsing account. This section also results in a General Fund revenue loss of $736,576 in FY 10, resulting in a net negative impact to the General Fund of a $371,576 in FY 10.

Sections 17 - 18 provide that the Teachers' Retirement Board (TRB) pay for the cost of administering health care benefits from the health insurance premium account (TRB health fund). Funding for the TRB's health care consultant ($94,000) was eliminated from the Other Expenses account for FY 10 as part of the $95 million reduction in outside consultant contracts in the FY 10 budget. There are approximately 16,000 health plan members and the current cost of professional services is less than 50 cents per member per month. The TRB health fund balance as of 10/30/09 was $61. 6 million.

Section 19 changes the effective date for the $68. 9 million Special Tax Obligation (STO) bond authorization for capital resurfacing from May 1, 2010 to January 1, 2010. This has no fiscal impact because the bond funds will not be expended until May, when the highway resurfacing program begins.

The Out Years

The impact of the bill upon the projected FY 11 deficit is to reduce it by at least $3. 7 million. The extent to which other reductions to appropriations (in section 1) are ongoing is unknown at this time. The reduction to certain funds will have an ongoing impact to investment interest earnings.

Source: Governor's Deficit Mitigation Plan for Fiscal Year 2010 dated 11/24/09; CORE-CT Financial Accounting System; OFA November 13, 2009 FY 10 - FY 14 General Fund and Transportation Fund Budget Projections and Fiscal Information.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.