OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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SB-494

AN ACT MAKING ADJUSTMENTS TO STATE EXPENDITURES FOR THE FISCAL YEAR ENDING JUNE 30, 2011.

As Amended by Senate "A" (LCO 5717), Senate "B" (LCO 5735), Senate "C" (LCO 5719)

OFA Fiscal Note

State Impact: See Below

Municipal Impact: See Below

Explanation

The table below summarizes the FY 11 Revised appropriations and revenue for all appropriated funds.

Sections 1 - 8 make modifications to the FY 11 appropriations (original appropriations as revised by PA 10-3, Deficit Mitigation). The appropriated funds changes are summarized below.

The below table provides a breakout of the budgeted lapse.

Spending Cap - The adopted FY 11 budget was under the spending cap by $589. 9 million on an all funds basis.   The bill's revised appropriation level is under the spending cap by $336. 4 million on an all funds basis, a net difference of $253. 5 million.

Growth Rate - The bill's growth rate for all appropriated funds is 0. 9% in FY 11. See the table below for details.

Sections 9 - 12 result in no net fiscal impact.   They reduce appropriations in the General Fund by $75. 2 million and in the Special Transportation Fund by $2 million and increase appropriations by the same amounts in each fund. This is intended to deal with agency shortfalls in funding.  

Section 13 (a) results in the post election transfer of $5 million from the Citizens' Election Fund (CEF) to the General Fund in FY 11.   The current balance of the CEF is $43 million and an additional $1 million will be deposited to the CEF in FY 1¹. 

Sec. 13 (b) transfers $4 million from the Workers' Compensation Fund to the General Fund in FY 11.

Section 13 (c) transfers $9 million from the Banking Fund to the General Fund in FY 11.

Section 13 (d) transfers $5 million from the Community Investment Act to the General Fund in FY 11.

Section 14 carries forward the unexpended balance of funds, estimated to be $1,473,000, for HOME CT into FY 11.

Section 15 specifies that the Governor appoint a chairperson to the Medical Inefficiency Committee and has no fiscal impact.

Section 16 eliminates references to grants and grant recipients related to the Kirklyn M. Kerr grant program, and does not result in a fiscal impact.

Section 17 clarifies language that passed in PA 10-3 (Deficit Mitigation) concerning pharmaceutical pricing.

Section 18 reduces $500,000 from the Magnet School account associated with the non-formula magnet increases for the Wintergreen and Edison magnet schools (savings reflected in Section 1). The reduction lowers the in-district grant for Wintergreen from $4,894 to $4,263 and lowers the in-district grant for Edison from $4,250 to $3,833.  

Section 19 carries forward the unexpended balance of funds, estimated to be $101,837, in the Office of Legislative Management for the purpose of redistricting into FY 11.

Sections 20, 46, 47, and 61 - 78 (originally sections 62 – 81) allow the Department of Social Services DSS to convert the HUSKY program from a managed care model to an Administrative Services Organization (ASO) model. DSS will utilize the provider networks of the ASO. It is anticipated that this will result in an annual savings of $11. 7 million from reducing the per member, per month administrative costs from $21 to $18. Additionally, there will be a one-time savings of $65 million from going from a prospective payment system to a retrospective payment system. Savings are reflected in Section 1.

These provisions also make various technical and conforming changes that have no fiscal impact.  

Section 21 reduces the cost sharing requirements under the Connecticut Home Care program from the current 15% to 6%. This change is anticipated to cost $9. 9 million in FY 11 (funding included in Section 1).

Section 22 increases the monthly premiums for HUSKY B recipients. Currently, premiums are $30 per child, with a monthly family cap of $50. This section raises this to $38 per child, with a family cap of $60. This is expected to save $576,000 annually. (Savings included in Section 1. )

Section 23 increases the DSS pharmacy dispensing fee from $2. 65 to $2. 90. This change is expected to cost $1. 13 million annually. (Funding included in Section 1. )

Section 24 delays the establishment of the Department of Aging until July 1, 2010. This will result in administrative savings of $452,864 in FY 11 (savings reflected in Section 1).

Sections 25 and 26 make statutory changes that enable the Department of Motor Vehicles to achieve annual Other Expenses reductions of $1 million beginning in FY 11 (included in Section 1), including: (a) allowing AAA to renew non-driver's license identification cards and motor vehicle registrations; and (b) repealing the requirement for registration stickers.

 Section 27 delineates the additional grant amounts provided to the Excess Cost grant through the transfer from the Transportation of Public School Children account, in order to meet federal Maintenance of Effort requirements for special education.   Without the transfer of funds the state would have incurred approximately a $19. 3 million reduction in federal funds.

Sections 28, 30 require the Department of Children and Families (DCF) to establish a program for homeless youth and youth at-risk of homelessness. The sum of $1 million has been provided within Section 1 of this bill to support this programming. Following implementation, the department will be able to produce the required results-based-accountability report card without incurring a fiscal impact.

Section 29 renders immune from civil or criminal liability any public agency serving a homeless child or youth, after making reasonable efforts to contact the parent/guardian for consent, unless consent is refused or withdrawn. This could result in savings for state or municipal entities by precluding litigation and/or judgment awards or settlements.

Section 31 makes procedural changes to the budget process for the Office of Legislative Management (OLM) and the Judicial Department, which have no fiscal impact. Specifically, the section prohibits the Office of Policy and Management from revising OLM's and the Judicial Department's budget request prior to transmittal to the Legislature. It also provides that any proposed reductions to the budget of OLM and the Judicial Department by the Governor shall become effective unless they are rejected by a two-thirds vote by the Appropriations Committee. The Appropriations Committee has fifteen days after notification of the proposed reductions to reject them.

Section 32 requires that state budget acts specify the allocation of state-wide reductions among each branch of state government. There is no related fiscal impact.

Section 33 carries forward the unexpended balance of funds for the Criminal Justice Information System into FY 11. The funds to be carried forward total approximately $1. 3 million.

Section 34 provides discretionary authority to the Commissioner of Children and Families to establish a performance-based payment system for licensed child-caring facilities. Any such payments would be in addition to those to which these private providers would otherwise be entitled. Since the authority is discretionary in nature it is expected that the commissioner will elect to implement the payment system only when resources allow. No additional funding has been provided within Section 1 for such incentive payments.

Section 35 allocates 50 rental assistance program certificates to individuals and families who are frequent users of state services. As this section allocates funded certificates rather than authorizing new certificates, there is no fiscal impact.

Section 36 exempts from eligibility and benefit determinations any funds that an individual receives as a payment under the Patient Protection and Affordable Care Act, P. L. 111-148. 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 unknown. No such reductions are assumed in Section 1.

Section 37 allows the Department of Social Services (DSS) to adjust the room and board rates paid to group home providers under contract with the Department of Developmental Services (DDS) to reflect the costs of required capital improvements.   The FY 10 – FY 11 biennial budget included a room and board rate freeze for all such providers.   It allows adjustments only when capital improvements for the health and safety of residents are required by the Commissioner of DDS and made during FY 10 and FY 11.  

If such improvements are required, DSS would fund the increased room and board costs through the Aid to the Disabled account. DSS and DDS jointly approve on average $2. 5 to $3. 0 million in capital improvements for homes each year, involving 125 to 175 group homes. Assuming that the majority of projects relate to safety corrections or improvements ($2. 5 million) and using an average useful life of 10 years and an interest rate of 4. 5%, the estimated cost of this section ranges from $300,000 to $350,000 annually.

Section 38 is anticipated to result in a savings to the Employers Social Security Tax Account. It provides a mechanism for the Comptroller to implement medical flexible spending accounts (FSA) for state employees by covering the administration costs with a portion of the program's resulting social security savings. It is anticipated that forfeitures will begin to be available after approximately 18 months to cover future administrative costs. Although effective July 1, 2010, it is assumed enrollment in the FSA program would not begin until January 1, 2011, as payroll deductions must be made annually on a calendar year basis. As a result, a larger portion of FICA savings would go to the state as of FY 13.

These provisions will also result in a loss in state income tax revenue. The amount of the revenue loss cannot be estimated as the number of participants and the FSA minimum and maximum contributions are not known at this time. The bill also adds an annual reporting requirement which does not result in an anticipated fiscal impact.

Section 39 requires OPM to identify $5 million in non appropriated accounts of the General Fund to be available for transfer into the General Fund.

Section 40 clarifies in statute that in situations requiring return receipts by certified mail, acceptable receipts include mail, electronic, and digital methods. As this codifies current practice, it is not anticipated to result in a fiscal impact.

Section 41 requires the Auditors of Public Accounts to annually audit certain reimbursements made from the Bradley Enterprise Fund to the Department of Public Safety.   This does not result in a fiscal impact.

Section 42 establishes a task force to study converting legislative documents from paper to electronic form.   This may result in a minimal cost to the Office of Legislative Management (OLM) in FY 11 for mileage reimbursement to the extent that legislators serve on the task force.   The current rate of mileage reimbursement is $0. 50 per mile.  

Section 43 transfers $8 million from the Connecticut State University operating reserve account to the General Fund in FY 11.

Section 44 reduces the transfer from the General Fund to the Special Transportation Fund by $16. 5 million.

Section 45 allows for the unappropriated surplus in FY 10 to be credited to the resources of the General Fund in FY 11. Currently OFA estimates the FY 10 surplus of $139. 3 million. Section 139 (originally section 142) transfers any unappropriated General Fund surplus, in excess of the amount in Section 45, from FY 10 to FY 11 to reduce the amount of ERRBs issued under the provisions of Sections 125-134.

Section 48 clarifies language that passed in PA 10-3 (Deficit Mitigation) concerning over the counter drugs. The mitigation plan did not contemplate limiting the purchase of over the counter drugs for the Connecticut AIDS Drug Assistance Program. This has no fiscal impact.

Section 49 clarifies language contained within PA 10-3 (Deficit Mitigation) concerning Medicaid vision services. Savings in the mitigation plan were specific to Medicaid. This has no fiscal impact.

Section 50 establishes an account receivable to ensure that the Department of Social Services can accept certain federal funds.

Section 51 carries forward up to $178,828 in the Office of Policy and Management for Other Expenses to prevent base closures.

Sections 52(a), (b), (c), (d) carries forward a total of $832,937² from various accounts in the Office of Policy Management and transfers it to the Litigation Settlement Account.

Section 53 carries forward $500,000 from Other Expenses for the purposes of litigation costs related to the Connecticut Coalition for Justice in Education Funding v. Rell lawsuit. The $500,000 will be used for short term staffing needs to assist the State Department of Education (SDE) in the discovery phase of the lawsuit.

Section 54 carries forward $1. 5 million from Other Expenses for the purposes of data assurances required for the receipt of the second round of federal State Fiscal Stabilization Funds (SFSF). The second application for SFSF requires students to be linked with teachers and to collect data on the courses in which students are enrolled and grades are earned. The link between student and teacher data must be incorporated into the state-wide longitudinal data system. The State Department of Education (SDE) requires $1. 0 million to provide the data and programming updates to their centralized student database system, and $500,000 for staff and consulting needs. This will allow the state to secure up to an additional $146. 3 million in federal funds through the second round of SFSF funds (currently budgeted).

Section 55 carries forward up to $100,000 in the Department of Banking in FY 11 to upgrade software.

Section 56 requires OPM, in consultation with the State Comptroller, to report on savings realized from the implementation of the Retirement Incentive Program. This section has no fiscal impact.  

Section  57 (a)(2) requires that the revenues received for the numbering and registration of vessels are to be distributed to first cover the boating account expenditures of the Department of Environmental Protection and Department of Motor Vehicles, and the remaining balance distributed as pro-rated payments to towns. The annual boating account revenues are estimated to be $5. 5 million. Annual administrative/operational expenditures are estimated to be $4. 4 million (excluding fringe benefits); and the vessel PILOT payments made to municipalities were $1. 2 million in FY 10.     

Section  57 (b) requires that the fringe benefit costs associated with the boating account be charged to the Comptroller's General Fund fringe benefit accounts. The annual fringe benefits costs associated with the boating account are estimated to be $1. 1 million. The FY 10 – FY 11 biennial budget included funding in the Comptroller's fringe benefit accounts for this purpose. As such, this provision, which codifies current practice, has no fiscal impact.  

Section 58 allows the Commissioner of Education to make supplemental grant payments in FY 10 to Hartford and the Capital Region Education Council (CREC) for the purposes of transporting students to magnet schools.

Section 59 makes a technical change and has no fiscal impact.

Section 60 allows DSS to implement certain policies while in the process of adopting regulations. This provision will allow DSS to attain the funding levels assumed with these policies.

Sections 79 and 80 (originally sections 79 and 80) remove certain provisions associated with the biometric identifier system. This is may result in equipment and processing savings to the Department of Social Services.

Section 81 (originally section 84) specifically allocates funds for the development of the UCONN Health Network established in PA 10-104. As this section allocates current funding, rather than providing for new funding, this has no fiscal impact.

Sections 82 and 140 - 142 (originally sections 85 and 145 – 147) make language changes to General Obligation (GO) bond authorizations that have no fiscal impact because no additional bonds are authorized.

Sections 83 – 124, 150 (originally sections 86 - 127, 155) change certificate of need (CON) filing fees, which results in a General Fund revenue loss of $230,000 in FY 11 and FY 12. These sections also results in a savings of $10,000 in FY 11 and FY 12 from the elimination of Office of Health Care Access' (OHCA, a division of the Department of Public Health) letter of intent publishing requirements.

OHCA's administrative regulations set the base CON filing fee at $1,000. For CONs related to capital expenditures exceeding $3 million, there is an additional fee of 0. 0005 times the projected total project capital expenditure (at minimum, an additional $1,500). Under the bill, the filing fee is a flat $500 and CONs are no longer required for capital expenditures, termination of services, and relocations. Currently, OHCA receives approximately 60 applications and $250,000 in CON revenue annually. It is anticipated that, under this bill, OHCA would receive approximately 40 CONs and generate $20,000 in revenue; a $230,000 loss in revenue to the General Fund.

These sections also require the Department of Public Health to establish policies and procedures to implement certain provisions and adopt final regulations by December 31, 2011. This requirement does not result in a fiscal impact to the agency.

Sections 125 – 134 and 138 (originally sections 128 – 137 and 141): The General Fund budget adopted in 2009 assumed a $1,290. 7 million revenue gain in FY 11 from the issuance of revenue bonds. The Economic Recovery Revenue Bond (ERRB) plan will produce a $955. 9 million General Fund revenue gain in FY 11 by pledging a portion of the revenue from charges currently imposed on electric company bills to issue bonds (see table below). The estimated amount of principal and interest payments on $989. 9 million (including $34 million in capitalized interest and issuance costs) is $1,132. 9 million, assuming an 8 year term and a 3. 1% interest rate³. The payment of debt service from CTA charges⁴ and the ECLM Fund⁵ will not have a General Fund fiscal impact because they are not General Fund revenue sources.

The bill will also result in:

1) A General Fund revenue gain to the Public Service Companies Gross Earnings Tax of between $9 million and $11 million per year between FY 11 and FY 20. The Public Service Companies Gross Earnings Tax is imposed at the rate of 6. 8% on residential customers and 8. 5% on non-residential customers. The revenue estimate assumes an average tax rate of 7. 6%.

2) This legislation continues a portion of the stranded cost charge on CL&P and UI electric bills between FY 11 and FY 20 so it will result in a cost to all rate payers, including the state and all municipalities. Currently, all rate payers pay approximately $0. 010 per kilowatt hour for this charge on their electric bill.

3) The add-back of $216. 5 million in FY 12 and $209. 2 million in FY 13 to projected General Fund revenue collections. These amounts would have been needed to pay debt service under the 2009 plan to securitize $1. 3 billion from existing General Fund revenue sources.

Section 126(c) (originally section 129) will result in a $40 million General Fund revenue gain in FY 11 from charges currently imposed on electric company bills.

Sections 135 - 136 (originally sections 138 – 139) create the Green Connecticut Loan Guaranty Fund Program, which is administered by the Connecticut Health and Educational Facilities Authority (CHEFA). The program will guarantee loans made by participating lending institutions to a participating qualified nonprofit organization for eligible energy conservation projects, including for two or more joint eligible energy conservation projects. Eligible projects include the purchase and installation of insulation, alternative energy devices, energy conservation materials, replacement furnaces and boilers, and technologically advanced energy-conserving equipment. Section 137 (originally section 140) restores $13 million in General Obligation (GO) bond funds for the Energy Conservation Loan Fund, which will result in General Fund debt service cost of $19. 8 million over 20 years assuming a 5. 0% interest rate. The section also amends the authorization language to provide $18 million for the Green Connecticut Loan Guaranty Fund Program.

Sections 143 - 146 (originally sections 148 - 151) restore a total of $0. 65 million in GO bond funding for: (1) planning and design of streetscape improvements in the North Hartford area along the Main Street corridor and (2) the Stanley L. Richter Association for the Arts in Danbury. This will result in General Fund debt service cost of $1 million over 20 years assuming a 5. 0% interest rate.

Section 147 (originally section 152) repeals the ombudsman services provisions. Funding for the Correctional Ombudsman contract was eliminated in PA 10-3 (Deficit Mitigation).

Section 148 (originally section 153) repeals the requirement that the Department of Environmental Protection extend from 20 to 30 years the repayment period for Clean Water Fund (CWF) revenue bond funds borrowed by Ansonia for a sewage treatment plant. The provision would have had a negative effect on the state's cash flow and a loss of short-term interest earnings because the state issues the CWF bonds for a term of 20 years and Ansonia would have repaid its CWF loan over 30 years. It will also reduce the size of Ansonia's total debt service cost due over the life of the bonds.

Section 149 (originally section 154) removes various provisions related to HUSKY managed care and has no fiscal impact.

Senate “A” makes various technical changes intended to properly implement the budget. It also makes various changes identified below:

● in FY 10, reduces the State Employee Retirement Contribution account by $1. 1 million with a corresponding increase to SDE's Magnet School account. Funding is provided for the purpose of reimbursing the Connecticut Regional Education Council (CREC) for magnet school transportation costs.

● clarifies that the reduction in the transfer from the General Fund to the Transportation Fund is for FY 11 only.

● delays the Contracting Standards Board until FY 12. The savings associated with delaying the hiring of the support staff is in the underlying bill.

● clarifies that up to $140. 0 million in unappropriated surplus from FY 10 will be credited to the resources of the General Fund in FY 11 and transfers from FY 10 to FY 11 any unappropriated General Fund surplus in excess of $140. 0 million to reduce the amount of ERRBs¹ issued under the provisions of Sections 128-137 of the underlying bill.

● makes various technical changes to General Obligation bond authorization language that has no fiscal impact because it does not authorize additional bonds.

Senate “B” eliminates the postemployment benefit deficit funding pilot program for one municipality to issue postemployment benefit plan deficit funding bonds on a one time basis.

Senate “C” reflects the revised FY 11 revenue estimates as adopted by the Finance, Revenue, and Bonding Committee on May 5, 2010 for the: 1) General Fund, (2) Special Transportation Fund, (3) Banking Fund, (4) Insurance Fund, (5) Consumer Counsel and Public Utility Control Fund, and (6) Workers' Compensation Fund.

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.