OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

EMERGENCY CERTIFICATION

HB-5095

AN ACT CONCERNING DEFICIT MITIGATION FOR THE FISCAL YEAR ENDING JUNE 30, 2009.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

Various State Agencies

GF and TF - See Below

Note: GF=General Fund; TF= Transportation Fund

Municipal Impact: None

Explanation

The bill makes modifications and revenue adjustments to the FY 09 budget. The various changes will result in a $131. 2 million net reduction in the anticipated FY 09 General Fund deficit. The table below identifies $51. 9 million in expenditure reductions and $79. 4 million in increased revenue to the General Fund. The bill also makes modifications to the Transportation Fund (TF) that will result in $1. 5 million in increased revenue to the TF in FY 09.

General Fund (GF)

 

Amount

Expenditure Savings:

 

Reduction to carry forwards (FY 07 surplus appropriation)

$3,050,000

Reduction in FY 09 Appropriation (net) [1]

4,181,446

Other Savings [2]

44,643,569

Subtotal Expenditure Savings

$51,875,015

Increased Revenue:

 

Transfer from Funds/Account

61,850,000

Other Revenue

17,500,000

Subtotal Increased Revenue

$79,350,000

   

Total GF Bill Impact

$131,225,015

Transportation Fund (TF)

Transfer to TF Revenue

$1,453,440

   

NET BILL IMPACT

$132,678,455

[1] The bill reduces GF appropriations by $4,455,446 and increases a GF appropriation by $274,000 for a net reduction to appropriations of $4,181,446.

[2] Other savings include: a reduction of $35 million in energy contingency funds; $10 million in cuts to personal services agreements and consultant services; and an increase in expenditures due to the release of $356,431 in Governor's recisions.

Further Explanation - Passage of this bill would reduce the FY 09 General Fund deficit by $131. 2 million. OFA's projected deficit as of 11/14/08 was $391. 8 million. Subsequent deficit mitigation actions, including PA 08-1 (November Special Session), the Governor's December recisions and additional lapse and federal revenue assumptions, along with this bill would lower OFA's 11/14/08 deficit estimate to $96. 4 million. It should be noted that OFA is continuing to monitor both revenue and expenditure data with the intent of issuing revised numbers on 2/2/09 and it is likely that estimates of the FY 09 deficit will significantly worsen. OFA will have a more precise estimate for the FY 09 deficit after examining all revenue sources (most notably 4th quarter estimated payments, sales and use tax, oil companies tax and public service corporations tax) which are due by 1/31/09.

As a result of changes to the FY 09 all funds appropriations contained in the bill, the state budget is under the spending cap by $13. 9 million.

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

Section 1 clarifies the intent of PA 08-1 (the November Mitigation Act) by allowing any increased revenue received by the state in FY 09 from expediting implementation of the money follow the person program to be deposited in the General Fund, rather than a non-lapsing account.

Section 2 delays a report on the long term reinvestment account from January 1, 2009 to January 1, 2010.   This will delay by one year a minimal administrative cost to the Department of Social Services (DSS).

Section 3 reduces funds carried forward from the FY 07 surplus to FY 09 by $3,050,000 in the agencies listed below.

Agency

Amount

Department of Public Works – Permanent Upgrades to Woodland Street

$1,000,000

Department of Economic and Community Development - Biofuels

$1,050,000

Department of Education – School Safety

$1,000,000

Total Carry Forward Reduction

$3,050,000

Section 4 reduces the General Fund appropriation for FY 09 by $4,455,446. These reductions are made to various agencies and accounts identified in the bill.

Sections 5 – 14; 17-21 and 24 transfer $61. 85 million from various funds/accounts identified below to the General Fund. This will result in a revenue gain to the General Fund in FY 09 and a corresponding reduction in available resources of the identified funds/accounts.

Fund Account

Amount

Section of Bill

Citizens' Elections Fund (CEF)

$7,500,000

5

Tobacco & Health Trust Fund

$6,000,000

6

Biomedical Research Trust Fund

$3,000,000

7

Fuel Oil Conservation Account

$10,000,000

8(a)(b)

Pre-Trial Account

$2,000,000

9

Underground Storage Tank

$3,000,000

10

Emergency Spill Response Account

$3,000,000

11

Emissions Fund

$1,000,000

12

Mashantucket Pequot & Mohegan Fund

$150,000

13

Energy Conservation & Load Management

$1,000,000

14

Banking Fund

$15,000,000

17

Workers' Compensation Fund

$4,000,000

18

Public, Educational & Gov't Programming

$2,000,000

19

Consumer Counsel & Public Utility

$2,000,000

20

Commercial Recording Account

$1,000,000

21

General Services Revolving Fund

$1,200,000

24

Total Funds Transfer

61,850,000

 

Sections 15 and 16 require a distributor selling a beverage container in the state that is subject to the bottle deposit law to pay any unclaimed deposits to the Department of Environmental Protection (DEP). This is anticipated to result in a General Fund revenue gain of $13. 8 million in FY 09 (partial year) and $24. 4 million in FY 10 and each year thereafter. The estimates were developed by analyzing Massachusetts unclaimed bottle escheat collection data and adjusting it for the difference in population.

Sections 22 and 23 transfer funds from the Emergency Relief ($1,166,440) and the Insurance Recoveries ($287,000) accounts to the resources of the Transportation Fund for FY 09.

Section 25(a) reduces the amount of funding available for biofuel production grants by $1,050,000, resulting in the modification of existing contracts for these grant funds. The Department of Economic and Community Development (DECD) works with the Connecticut Center for Advanced Technology (CCAT) to administer the program.

Section 26 requires the Governor to direct executive branch agencies to reduce, by $10 million in the aggregate, the cost of personal services and consulting agreements during FY 09. The bill further requires the Office of Policy and Management (OPM) to develop a plan that will include an analysis of the impact on program services as a result of the reduction. It is anticipated that OPM will be able to complete the plan within the normal budgetary resources of the agency.

Section 27 requires the Department of Children and Families to submit a plan by 2/13/09, which can be accomplished within its normally budgeted resources. Riverview Hospital for Children and Youth is currently operating with a census 21 below its capacity. Should a plan be developed and implemented that allows for the diversion of children or youth who would otherwise be placed in out-of-state settings to services at Riverview, a potential indeterminate net savings per child diverted may result.

Section 28 exempts from eligibility and benefit determinations any funds that an individual receives as a payment under the federal Economic Stimulus Act of 2008. This change will preclude any savings that the state or localities may have realized based on reduced caseloads or benefit payments that may have resulted had they counted these payments as income. The amount of this potential reduction is not known.

Section 29 exempts certain line items from recisions specified in the governor's 12/17/08, Deficit Mitigation Plan. (The amounts are indicated in the table below. ) As a consequence, the agencies will retain these funds, which were provided to support positions, purchase equipment, or contract for probation services and research.

Judicial:

Amount

Equipment

$47,130

Alternative Incarceration Program

$54,268

Justice Education Center

$15,000

 

$116,398

Agriculture Experiment Station:

 

Personal Services

$240,033

   

Total Restoration of Recisions

$356,431

Sections 30 and 31 transfer $3,908,890 from the Deferred Maintenance for Housing account in the Department of Economic and Community Development (DECD) to the Tax Abatement ($1,704,890) and Payment-in-Lieu-of-Taxes (PILOT) ($2,204,000) programs in FY 09. The programs allow DECD to make payments to participating municipalities on behalf of certain private or non-profit housing developments (Tax Abatement) and certain housing authorities (PILOT). The programs were funded via a transfer from the Department of Social Services in FY 08. Neither program received appropriated funding in the FY 09 budget.

The balance of the Deferred Maintenance for Housing account is currently approximately $7. 0 million.

Section 32 reduces, from $11 million to $7. 3 million, the FY 09 transfer from the Tobacco and Health Trust Fund to the Department of Social Services for the Charter Oak Health Plan. The $3. 7 million is instead credited to the resources of the General Fund.

Section 33 appropriates, in FY 09, $274,000 from the General Fund to the Department of Administrative Services (DAS). DAS will distribute such funding to state agencies to assist contracted custodial services employees in procuring health care coverage.

Section 34 repeals Section 8 of PA 08-2 of the August Special Session. This will result in $35 million in increased General Fund revenue for FY 09. The section also repeals Section 2 of PA 08-68 (Section 28 of the bill supersedes this language and clarifies its intended impact, as identified above).

The Out Years

The ongoing fiscal impact associated with section 15 is identified above. The extent to which any reductions to various FY 09 appropriations result in ongoing savings in the out years is unknown. It should be noted that any reduction to certain other funds may have an ongoing impact to investment interest earnings.

Source: Governor's Deficit Mitigation Plan for Fiscal Year 2008-2009 dated December 17, 2008; CORE-CT Financial Accounting System; OFA November 14, 2008 FY 09-FY 12 General Fund and Transportation Fund Budget Projections and Fiscal Information; OFA Budget Book 2007 – 2009 Biennium; Massachusetts Department of Revenue.

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.