Budget Process

The General Assembly of the State of Connecticut operates through a bicameral legislature in which members of both the Senate (36 members) and the House of Representatives (151 members) serve two-year terms. The executive power of the state is vested in the Governor who is elected to serve a four-year term. The ultimate "power of the purse", the authority to spend public funds and tax the public, is vested in the legislative branch of government. In certain selective instances, however, some of this power is delegated by the legislature to the Governor.

The main responsibility of the Governor is to recommend the budget to the legislature and execute the budget passed by the legislature by carrying out the program mandates through the agencies of the executive branch. Prior to the 1971-72 fiscal year, the state operated with both a biennial budget and a biennial legislature. Over the last two decades, the state has been operating with an annual budget, and a legislature which meets annually, with the fiscal year commencing on July 1st and continuing until the following June 30^th. Beginning with the 1993-94 fiscal year, the State again operates with a biennial budget and implements numerous reforms instituted by the legislature during the 1991 Session. The following paragraphs more fully discuss the budget cycle, politics of the process and budget reforms in Connecticut.

The Budget cycle consists of two phases: budget formulation and budget execution.

The Budget and Financial Management Division of the Office of Policy and Management (OPM) develops forms and instructions to be used by state agencies in submitting their budget requests. These forms and instructions are sent to the agencies by August 1^t. This is eleven months prior to the effective date of the biennial budget being requested. The state’s fiscal year runs from July 1 through June 30. (Sec. 4-71 CGS, as amended by PA 91-3, JSS)¹

The agencies prepare their biennial budget requests (May-August). With the evolution of the program budget, agencies have been required to present a current services budget plan and a separate list of programmatic options if changes in expenditures or revenues are requested. The changes represent anything above or below the present level (current services), as well as the reallocation of resources. The current services level includes inflation, caseload increases, annualization of partial year costs, and other increases based on current law. (Sec. 4-77 CGS, as amended by PA 91-3, JSS)

Agencies must submit their current services biennial budget requests to the Budget and Financial Management Division on or before September 1^st of each even-numbered year and program options are due by October 1^st. In each odd-numbered year adjustments and revisions are to be submitted if necessary.

Budget analysts in the Budget and Financial Management Division review requests and prepare recommendations for agencies within their jurisdiction. Recommendations are based on an analysis of the efficiency and effectiveness of existing programs, and the perceived public need for new and expanded programs (September-October). (Sec. 4-77 CGS, as amended by PA 91-3, JSS)

The Secretary of OPM reviews all recommendations. Adjustments are made in accordance with the administration’s determined priority of public needs and State revenue estimates. (Sec. 4-77 CGS, as amended by PA 91-3, JSS)

When there is a newly elected Governor, the Secretary of the Office of Policy and Management sends the tentative recommendations to the Governor by November 15^th for review. (Sec. 4-79 CGS, as amended by PA 91-3, JSS)

The Governor-elect may hold budget hearings with such agencies as s/he desires, or at the request of any agency. Final policy decisions are then incorporated in the recommended budget (December-January). (Sec. 4-80 CGS, as amended by PA 91-3, JSS)

The Governor transmits the budget document for the next biennium to the legislature by the first session day following the third of February in each odd numbered year. The package presented to the General Assembly must contain a separate budget for each of the two fiscal years and a report outlining estimated revenues and expenditures for the three years following the biennium. If, however, the Governor has been elected or succeeded to the Office of Governor since the submission of the last budget document, s/he shall transmit the biennial budget recommendations and reports to the General Assembly by the first session day following February 14^th. (The General Assembly convenes on the first Wednesday after the first Monday in January in odd-numbered years.) In even numbered years, the Governor will transmit a report on the status of the budget enacted, along with any recommendations for revisions and adjustments if needed, including estimated revenues and expenditures for the next three years. Such transmittal occurs on the Wednesday after the first Monday in February which is the day that the General Assembly convenes.

The Governor’s recommended budget document is required by statute to contain four parts: the Governor’s budget message; recommendations for appropriations for every agency for each fiscal year of the biennium (the recommendations would include the operating budgets for the biennium and bonding requirements for capital projects); a draft or drafts of the appropriations, bonding and revenue bills to carry out the recommendations made in parts one and two; and recommendations concerning the economy, and the effect of the state’s budget thereon. (Sec’s. 4-71 through 4-74a CGS, as amended by PA 91-3, JSS)

The legislature’s Appropriations and Finance Committees review the Governor’s recommendations. The Appropriations Committee holds public hearings on each agency’s budget. In work sessions, Appropriations sub-committees (Appendix A) review the agency operating budgets with agency heads, Budget and Financial Management Division staff (executive) and Office of Fiscal Analysis (OFA) staff (legislative). The Finance Committee and its sub-committees (Appendix A) review the revenue and capital projects portions of the budget. The sub-committees, with the assistance of OFA staff, develop recommendations for presentation to the Committee through its chairpersons. These recommendations are refined and reviewed with leadership. The committees draft and report final bills for floor action (February-April). OFA prepares a committee budget report containing legislative intent for all changes made by the Appropriations Committee to agency budgets.

The legislature appropriates funds to the agencies for the biennium beginning the following July 1 in its odd-numbered-year session, primarily in one bill. In even-numbered years, at least one bill which adjusts expenditures for the ensuing fiscal year must be reported. The bill is required to contain legislative revenue estimates. By law (both constitutional and statutory), the level of appropriation cannot exceed revenue estimates. Bonds are authorized for state facilities through a main bond bill. Two other significant bond bills are passed: one for various continuing statutory programs such as school construction, housing and pollution control grants, and one for transportation purposes. In addition to the Appropriations Act, there may be other individual bills authorizing the expenditure of funds (although these are not usually significant), as well as several bills relating to revenue measures (tax changes as well as various fees and fines). (Sec. 2-35 CGS, as amended by PA 91-3, JSS)

The OFA publishes an annual report on the budget as passed by the legislature. It provides detailed information on agency budgets including newly authorized expenditures and expenditure reductions, changes in state taxes and other revenue measures, and bonding.

Agency appropriations are administered by the Budget and Financial Management Division staff through the allotment process to ensure sound fiscal management of State funds. Generally, funds are allotted quarterly based on an annual financial program submitted by the agency for review and the Governor’s approval, prior to each July first. The Governor, after filing a report with the Appropriations and Finance Committees, may restrict the allotment of appropriated funds due to a change in circumstances, or if he determines that estimated budget resources will be insufficient to finance appropriations in full. If the monthly financial statement issued by the Comptroller includes a projected deficit greater than 1% of the total General Fund appropriations, the Governor is required to restrict allotments within specified limits (up to 5% of an individual appropriation account within an agency but not more than 3% of total appropriations in a fund). The Governor, with Finance Advisory Committee (FAC) approval, can reduce overall appropriations more than 3% of the total appropriation from any fund or more than 5% of any appropriation. Any change, however, that would result in a reduction of more than 5% of the total appropriation from any fund, requires the approval of the General Assembly. (Sec. 4-85 CGS, as amended by PA 91-3, JSS)

Adjustments in the quarterly allotment program or transfers of funds from one appropriation account to another are requested through the Budget and Financial Management Division. If a transfer exceeds 10% of the original appropriation or $50,000, whichever is less, it must be approved by the Finance Advisory Committee, a joint legislative-executive body. The Committee is composed of: the Governor, Lieutenant Governor, Treasurer, Comptroller, and two Senate members (not more than one from same political party) and three House members (not more than two from same political party) of the Appropriations Committee. (Sec. 4-93 CGS, as amended by PA 91-3, JSS)

The allocation of bond authorizations is the responsibility of the Bond Commission, a joint executive-legislative body composed of: the Governor, Treasurer, Comptroller, Attorney General, Secretary of OPM, Commissioner of the Department of Public Works and the Co-chairpersons and Ranking members of the Finance, Revenue and Bonding Committee. Due to the nature of the allocation process and the time period required for capital construction, a bond authorization may remain on the books for several years. (Sec. 3-20 CGS)

Most commissioners and many department heads are appointed by the Governor and serve at his pleasure. Thus, agency heads of the executive branch are normally receptive to the directives the Governor may promulgate with regard to issues and policy questions having budgetary implications. In the area of education, however, numerous agencies are governed by boards or commissions appointed for terms rather than serving at the Governor’s pleasure. They tend to exhibit more independence with regard to their budgetary requests.

Depending on the division of political power within the legislature and due to the joint committee system, various compromises are reached among the committee chairpersons, legislative leaders and between the legislative and executive branches. The degree of compromise in the legislature is partially dependent on the ratio of one party to the other. The smaller the ratio, the more compromise tends to occur. Also, more compromise tends to occur between branches when the legislative majority is of one party and the Governor is of the other party or a third party. The joint committee system tends to reduce conflict between the House and the Senate. In recent years, moderate and liberal caucuses within the majority party have also played a major part in the process.

The budget decision process can undergo great strains during an election year when there is a greater perceived need to reduce the burden on the taxpayers (individuals and businesses) and at the same time, meet demands for more services and grants to local governments, and the requests of other special interest groups.

In Connecticut, the Governor has historically had the greatest impact on the budgetary process since s/he presents the executive budget to the legislature, and it is with this budget that the legislature works. Although the legislature can make any changes it wishes, it has been traditional in Connecticut that it has made relatively few major changes in the budget or revenue structure. This condition appears to be changing as the legislature has begun to assert itself to a larger degree in recent years, particularly through more in-depth analysis of the budget by the Appropriations and Finance Committees – aided in part by the addition of professional legislative budget staff since the early 1970’s. (Sec. 2-71© CGS)

The introduction of a professional staff was part of the modernization of the Legislative Branch which both enabled the legislature to increase its role in the process and gain equal footing with the Executive Branch. In addition, access to various information has increased the authority and capabilities of the Legislative Branch over the past two decades. Activities aiding the legislature are:

A Constitutional amendment passed in 1970, allowing the state legislature to meet in even numbered years as well as odd numbered years, may be considered a form of both legislative and fiscal reform. As originally intended by advocates of this reform, the even-year sessions were supposed to be restricted to fiscal matters, emergencies, and issues of special importance. However, it seems that the legislature has not succeeded in limiting the short session to financial programs and important legislation.

In 1978, the legislature created a Budget Reserve Fund, which may have a balance equal to 5% of the net General Fund appropriations. The Budget Reserve Fund, by law, can only be used to finance state operating deficits at the end of a fiscal year. It cannot be used to balance a proposed budget for the coming fiscal year.

Since fiscal 1985-86, all state agencies have been required to submit budgets in a program format (Sec. 4-73(b) CGS). Within each program, performance data (such as workload, quality or level of services, efficiency and effectiveness) are given. Still, the budgetary decision-making process tends to be incremental because the base from which the next year’s budget is built is the current year’s budget and service level, as adjusted for inflation. In addition, the current fiscal year (1992-93) will see the first phase of implementation of the ABS (Automated Budget System) which will allow for greater management and oversight in the budget process.

The enactment of the state income tax was the backdrop for the implementation of numerous budget reforms including a biennial budget procedure; however, expenditure estimates and revenue forecasts are done annually, as discussed in the Budget Formulation Section of this report. The law (PA 91-3 JSS) established a spending cap on general budget expenditures. General budget expenditures cannot exceed expenditures authorized for the previous fiscal year by more than the average increase in personal income in the state over the preceding five years, determined by the U.S. Bureau of Economic Analysis or the percentage increase in inflation during the preceding twelve months as determined by the U.S. Bureau of Labor Statistics, whichever is greater. Funds earmarked for debt service, grants to distressed municipalities in effect on July 1, 1991, first time implementation of court orders or federal mandates (the base expenditure would subsequently be considered in the calculation for the next Fiscal Year) are not included in the cap, nor are expenditures from the Budget Reserve Fund. The legislature can exceed the cap if the Governor declares an emergency or extraordinary circumstances and three-fifths of the General Assembly vote to do so. The same legislation also tightens the limit on the state’s bonded indebtedness payable from General Fund tax receipts to one and six-tenths times the total General Fund tax receipts of the state, as estimated by the Finance, Revenue and Bonding Committee, for the fiscal year in which the authorizations will take effect. The limit can be exceeded by the General Assembly to meet cashflow or needs resulting from natural disasters. The debt issued to cover budget deficits in FT 90-91 and before is excluded from the ceiling. In addition, the State Treasurer must certify all bonding bills before passage by the General Assembly and before the Bond Commission authorizes new bonds to be issued, ensuring that their passage will not cause the ceiling to be exceeded.

[1] Sections of the statutes are cited for reference purposes. In most cases, the section is cited along with reference to PA 91-3, JSS, which made major changes in the budget process.

APPENDIX A

Appropriations Subcommittees

Collective Bargaining

Conservation and Development

Elementary and Secondary Education

General Government A

General Government B

Health and Hospitals

Higher Education

Human Services

Judicial and Corrections

Legislative

Regulation and Protection

Transportation

Finance Subcommittees

Bonding

Special Revenue

			Introduction
			The Timing of the Budget Cycle: Year 1 Year 2 (.pdf)
			Budget Formulation
			Budget Execution
			The Politics of the Budget Process
			Role of Various Actors
			Budget Reforms and Public Expenditure Analysis
			Appropriations & Finance Subcommittees
			Click here for a glossary of Budget Terms