AN ACT CONCERNING EXPENDITURES AND REVENUE FOR THE BIENNIUM ENDING JUNE 30, 2015.

OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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

HB-6704

AN ACT CONCERNING EXPENDITURES AND REVENUE FOR THE BIENNIUM ENDING JUNE 30, 2015.

As Amended by House "A" (LCO 8471)

House Calendar No.: 678

State & Municipal Impact: See Below

Explanation

The bill contains spending and revenue for the FY 14 - FY 15 biennium and includes spending adjustment for FY 13.

The bill includes: (1) appropriations in ten funds totaling $18.6 billion in FY 14 and $19 billion in FY 15 (sections 1 - 10), (2) provisions to implement the budget (sections 11 - 69), (3) $142 million in FY 13 General Fund deficiency appropriations (section 62), (4) various policy changes that yield net revenue increases of $410.2 million in FY 14 and $330.1 million in FY 15 (sections 70-113), and (5) revenue estimates as adopted by the Finance Committee 6/1/13. The table below compares the revenue estimates to the appropriations included in the bill.


Fund	FY 14 $			FY 15 $
Fund	Approp.	Revenue	Surplus /(Deficit)	Approp.	Revenue	Surplus/ (Deficit)
General	17,186.0	17,190.1	4.1	17,504.8	17,507.5	2.7
Special Transportation	1,243.2	1,243.7	0.5	1,322.3	1,322.7	0.4
Other Appropriated	174.6	175.3	0.7	178.7	179.7	1.0
TOTAL	18,603.7	18,609.1	5.3	19,005.8	19,009.9	4.1

APPROPRIATIONS

Sections 1 - 10 include appropriations totaling $18.6 billion in FY 14 and $19 billion in FY 15 as summarized in the table below.

Fund Summary of FY 14 and FY 15 Appropriations


Item	FY 14 $	FY 15 $
Gross Appropriations
General Fund¹	17,358,606,991	17,663,333,266
Special Transportation Fund	1,254,182,080	1,333,312,395
Banking Fund	26,608,448	27,845,849
Insurance Fund	30,744,674	31,968,453
Consumer Counsel and Public Utility Control Fund	24,868,827	25,384,201
Workers' Compensation Fund	23,199,856	24,789,229
Mashantucket Pequot and Mohegan Fund	61,779,907	61,779,907
Soldiers, Sailors and Marines' Fund	3,099,619	3,156,988
Regional Market Operation Fund	921,680	941,498
Criminal Injuries Compensation Fund	3,380,286	2,787,016
Total - Gross Appropriations	18,787,392,368	19,175,298,802
General Fund (GF) Lapses
GAAP Lapse	(5,500,000)	(7,500,000)
General Lapse – Executive	(13,785,503)	(13,785,503)
General Lapse – Judicial	(401,946)	(401,946)
General Lapse – Legislative	(56,251)	(56,251)
Unallocated Lapse	(91,676,192)	(91,676,192)
Unallocated Lapse – Judicial	(7,400,672)	(7,400,672)
Unallocated Lapse – Legislative	(3,028,105)	(3,028,105)
Transfer GAAP Funding	(40,000,000)	-
Municipal Opportunities and Regional Efficiencies Program	-	(10,000,000)
General Other Expenses Reductions – Legislative	(140,000)	(140,000)
General Other Expenses Reductions – Executive	(3,312,000)	(3,312,000)
General Other Expenses Reductions – Judicial	(548,000)	(548,000)
Statewide Hiring Reduction – Executive	(5,478,184)	(16,675,121)
Statewide Hiring Reduction – Judicial	(1,128,261)	(3,434,330)
Statewide Hiring Reduction – Legislative	(190,309)	(579,285)
Total – GF Lapses	(172,645,423)	(158,537,405)
Transportation Fund (TF) Lapses
Unallocated Lapse	(11,000,000)	(11,000,000)
Total – TF Lapses	(11,000,000)	(11,000,000)
Net Appropriations
General Fund¹	17,185,961,568	17,504,795,861
Special Transportation Fund	1,243,182,080	1,322,312,395
Banking Fund	26,608,448	27,845,849
Insurance Fund	30,744,674	31,968,453
Consumer Counsel and Public Utility Control Fund	24,868,827	25,384,201
Workers' Compensation Fund	23,199,856	24,789,229
Mashantucket Pequot and Mohegan Fund	61,779,907	61,779,907
Soldiers, Sailors and Marines' Fund	3,099,619	3,156,988
Regional Market Operation Fund	921,680	941,498
Criminal Injuries Compensation Fund	3,380,286	2,787,016
TOTAL - NET APPROPRIATIONS	18,603,746,945	19,005,761,397
¹The FY 14 and FY 15 General Fund appropriations for the Medicaid account in the Department of Social Services reflect only the state share of the joint state/federal program. Thus to remove the federal share of the Medicaid appropriation in FY 14, the General Fund appropriation was reduced by $2.8 billion. In FY 15, $3.2 billion was reduced from the General Fund appropriation.

Net Funding of Medicaid

The FY 14 and FY 15 appropriation for the Department of Social Services' Medicaid account reflects only the state's share of this joint state/federal program, as shown in the table below. For FY 13, the $4,697,969,332 gross appropriation for Medicaid included both the state's obligation as well as the reimbursable federal funds. The table below reflects the state and federal share of the Medicaid expenditures in FY 14 and FY 15.

State and Federal Share of Medicaid Expenditures

Item	FY 14 $	FY15 $
State Appropriation	2,322,513,826	2,069,136,668
Federal Share	2,768,723,827	3,204,946,670
GROSS EXPENDITURES	5,091,237,653	5,274,083,338

Spending Cap

Based on sections 1-10, 62, 67, and 69, the budget is under the spending cap by approximately $12 million in FY 14 and $162.1 million in FY 15. Due to the implementation of net funding of Medicaid in the Department of Social Services (DSS) in the FY 14 and FY 15 Budget, the base upon which the spending cap is calculated has been adjusted to also reflect net funding. Consequently, the FY 14 spending cap calculation base is adjusted downward by $2,225.3 million.

Growth Rate

The growth rate for all appropriated funds is 3.6% over FY 13 estimated expenditures in FY 14 and 2.2% in FY 15. The FY 13 estimated expenditures from the DSS Medicaid account have been adjusted downward by $2.4 billion to reflect only the state share of the joint state/federal Medicaid program. See the table below for details.

FY 14 and FY 15 Budget Growth Rates (by fund – in millions)


Fund	FY 13 Est. Exp.¹ $	FY 14 Approp. $	FY 14 Change		FY 15 Approp. $	FY 15 Change
Fund	FY 13 Est. Exp.¹ $	FY 14 Approp. $	$	%	FY 15 Approp. $	$	%
General	16,573.1	17,186.0	612.9	3.7%	17,504.8	318.8	1.9%
Transportation	1,214.9	1,243.2	28.3	2.3%	1,322.3	79.1	6.4%
Other Appropriated	170.3	174.6	4.3	2.5%	178.7	4.1	2.3%
TOTAL	17,958.3	18,603.7	645.4	3.6%	19,005.8	402.1	2.2%
¹The FY 13 General Fund estimated expenditure from the DSS Medicaid account has been adjusted downward by $2.4 billion to reflect only the state share of the joint state/federal Medicaid program in DSS.

Sections 11 - 69 are identified in the table below.

Section	Agency	Description
11(a)	OPM/ Various	OPM shall recommend reductions in executive branch expenditures for FY 14 and FY 15 by $13.8 million.
11(b)	OPM/ OLM	OPM shall recommend reductions in legislative branch expenditures for FY 14 and FY 15 by $56,251.
11(c)	OPM/ Judicial	OPM shall recommend reductions in Judicial Department expenditures for FY 14 and FY 15 by $401,946.
12(a)	OPM/ various	OPM shall recommend reductions in executive branch expenditures in Personal Services by $5.5 million in FY 14 and $16.7 million in FY 15. Savings are anticipated to be achieved by implementing a statewide hiring reduction across executive branch agencies.
12(b)	OPM/ various	OPM shall recommend reductions in legislative branch expenditures in Personal Services by $190,309 in FY 14 and $579,285 in FY 15. Savings are anticipated to be achieved by implementing a hiring reduction across legislative branch agencies.
12(c)	OPM/ various	OPM shall recommend reductions in the Judicial Department expenditures in Personal Services by $1.1 million in FY 14 and $3.4 million in FY 15. Savings are anticipated to be achieved by implementing a hiring reduction across the Judicial Department.
13	DSS	Allows DSS to establish receivables for the reimbursement anticipated from projects related to the development of health insurance and Medicaid data information technology systems. This section does not result in a fiscal impact as it is administrative in nature.
14	DPH	Allows up to $115,000 from the Stem Cell Research Fund (SCRF) to be used by DPH for administrative costs in FY 14. Funding of $85,000 in FY 14 and $115,000 in FY 15 is included in DPH's budget in Section 1 of the bill for administrative support of the SCRF.
15	DCF	Suspends the rate adjustments for DCF-funded private residential treatment centers in FY 14 and FY 15. The savings of $4.5 million in FY 14 and $7 million in FY 15 are reflected in Section 1 of the bill in DCF's budget.
16	DSS/ DOH/ SDR	Agencies shall enter into memoranda of understanding for administrative support purposes. This will not result in a fiscal impact as it is administrative in nature.
17(a)(b)	RSA – OPM	Allows OPM to transfer funding to and from the Reserve for Salary Adjustments account (RSA) and other agencies for specific salary and wage related expenses.
18(a)	RSA - OPM	Allows for the unexpended funds for collective bargaining costs to be carried forward from FY 13 into FY 14 and FY 15. It is estimated up to $18.4 million in the General Fund and up to $1.8 million in the Special Transportation Fund will be carried forward.
18(b)	RSA - OPM	Allows for the unexpended funds for collective bargaining costs to be carried forward from FY 14 into FY 15.
19	UCHC/ DPH	Transfers $500,000 from the Tobacco and Health Trust Fund (THTF) to UConn Health Center in FY 14 and FY 15 for the CT Health Information Network. This reduces the THTF balance by $500,000 in both FY 14 and FY 15.
20(a)	DPH	Transfers $1,050,000 in FY 14 and FY 15 from the THTF to the following: (1) Easy Breathing ($150,000 for adult asthma and $250,000 for children's asthma); (2) $150,000 for CT Coalition for Environmental Justice for Asthma Outreach; and (3) $500,000 for regional emergency medical services coordinators. This further reduces the THTF balance by $1,050,000 in both FY 14 and FY 15.
20(b)	DSS/DPH	Transfers $3.4 million in FY 14 and FY 15 from the THTF to DSS – Medicaid for smoking cessation programs. This reduces the THTF balance by a corresponding amount in FY 14 and FY 15.
20(c)	DDS/ DPH	Transfers $500,000 in FY 14 and $750,000 in FY 15 from the THTF to DDS to implement recommendations resulting from a study conducted pursuant PA 11-6 to enhance and improve the services and supports for individuals with autism. This reduces the THTF balance by a corresponding amount.
20(d)	DSS/DPH	Transfer $200,000 for FY 14 and FY 15 from the THTF to DSS for Other Expenses to support UConn's Medicaid Partnership. This reduces the THTF balance by a corresponding amount in FY 14 and FY 15.
21	TRB	Implements the savings in the budget by reducing the state's share of the Teachers Retirement Board retiree health services costs to 25% and municipal health subsidy to 25%. This results in a reduction of $8.3 million in FY 14 and $9.7 million in FY 15 in the retiree health service cost account and a reduction of $1.8 million in both FY 14 and FY 15 in the municipal health subsidy account. These savings are reflected in section 1 of the bill in TRB's budget.
22	Various	Allows for the transfer of funds between agencies via the use of FAC to maximize federal matching funds. This allows any General Fund appropriation to be transferred between agencies to maximize federal funding with FAC approval. Funds generated through transfer may be used to reimburse GF expenditures or expand programs as determined by the Governor and with FAC approval.
23	Various	Allows for the adjustments to appropriations, with the approval of FAC, to maximize federal funding available to the state. This allows any General Fund appropriation to be adjusted by the Governor with FAC approval in order to maximize federal funding. The Governor shall present a plan for any such transfer.
24	DSS/ UCHC	Allows for the transfer from UCHC to DSS's Disproportionate Share – Medical Emergency Assistance or Medicaid accounts to maximize federal reimbursement. This allows the state to receive revenue as anticipated.
25	DSS/ DMHAS	Directs DSS to make Disproportionate Share (DSH) payments to hospitals in DMHAS for operating expense and related fringes. This section does not result in a fiscal impact as it requires DSS to make payments to DMHAS as anticipated.
26	DSS/ DVA	Allows DVA appropriations to be transferred to DSS's DSH-Medical Emergency Assistance or Medicaid accounts to maximize federal reimbursement. This section does not result in a fiscal impact as it allows the state to receive revenue as anticipated.
27	SDE/DDS	Transfers $1 million in FY 14 and FY 15 of Part B IDEA (federal funds) from SDE to the Department of Developmental Services for the Birth-to-Three Program.
28	SDE	Establishes the distribution amount for the specific priority school districts programs for FY 14 and FY 15. Funding is included in Section 1 of the bill in SDE's budget.
29	SDE/OEC	Allows for the unexpended funds for school readiness quality enhancement to be carried forward from FY 13 into FY 14 and transferred to the Office of Early Childhood.
30(a)	DMHAS	Allows up to $1.1 million in FY 14 and FY 15 of the Pre-Trial Alcohol Substance Abuse Program funding to be used for Regional Action Councils. In FY 12 total available funding in this non-appropriated account was approximately $5.4 million.
30(b)	DMHAS	Allows up to $510,000 in FY 14 and FY 15 of Pre-Trial funding to be used for the Governor's Partnership to Protect CT's Workforce. In FY 12 total available funding in this non-appropriated account was approximately $5.4 million.
31	UConn	Allows $250,000 of UConn funding in FY 14 and FY 15 to be used for the CT Center for Advanced Technology.
32	OPM	Allows for the unexpended funds for health care and pension consulting contracts to be carried forward into FY 14 and FY 15. It is estimated that approximately $71,000 will be carried forward.
33	OPM	Allows for the unexpended funds for CJIS to be carried forward from FY 13 into FY 14 and FY 15. It is anticipated that at least $500,000 will be carried forward.
34	DDS	Requires that DDS receive 100% reimbursement (or an alternative amount identified by the agency) from private providers where their actual expenditures are less than the amount received by the department for both FY 14 and FY 15. This gives DDS the discretion to allow providers to retain cost settlement funds which could reduce the savings associated with requiring that DDS receive 100% reimbursement.
35	OHE	Allows up to $400,000 in FY 14 and $475,000 in FY 15 in the student protection account to be available to the Office of Higher Education. These funds are used to support three staff members who provide oversight to the 91 private occupational schools enrolling nearly 27,000 students and generating $175 million in net tuition revenue.
36	DMV	Allows for carry forward funding in FY 14 for the Commercial Vehicle Information System and Network Project. This project is ongoing and the last phase is expected to be completed in FY 14. It is estimated that approximately $338,450 will be carried forward.
37(a)(b) (c)	DMV	Allows for carry forward funding in FY 14 and FY 15 for use of upgrading DMV's registration and driver license data processing system. It is estimated that $1 million will be carried forward.
38	Various	Establishes the authorized position count as the one published in the OFA budget book, and permits the governor with FAC approval to modify this count. The constituent units of higher education are exempt from this provision.
39	DOL	Specifies that up to $100,000 of Jobs First Employment Services funding is reserved for The Workplace, Inc., the Bridgeport area Workforce Investment Boards.
40(a)	OLM	Allows for the unexpended balance for CASE to be carried forward and used in FY 14 for a health impact assessment study. It is estimated that approximately $77,050 will be carried forward.
40(b)	OLM	Allows for the unexpended balance of funds to be carried forward from FY 13 into FY 14 for a disparity study. These funds were originally appropriated to CHRO under PA 11-61, Sec. 67 and carried forward and transferred to OLM under PA 12-104, Sec. 12. It is anticipated that $300,000 will be carried forward.
40(c)	OLM	Allows up to $90,000 in Other Expenses to be carried forward from FY 13 into FY 14 for the Eyewitness Task Force.
40(d)	OLM	Allows up to $316,900 in Other Expenses to be carried forward from FY 13 into FY 14 for renovations to the Old State House cupola.
40(e)	OLM	Allows up to $80,000 in Minor Capital Improvements to be carried forward from FY 13 into FY 14 for renovations to the Old State House cupola.
40(f)	OLM	Allows up to $100,000 in Minor Capital Improvements to be carried forward from FY 13 into FY 14 for upgrades/repairs to the Capital generator.
40(g)	OLM	Allows up to $20,000 in Equipment to be carried forward from FY 13 into FY 14 for various equipment items.
40(h)	OLM	Allows up to $150,971 in Other Expenses to be carried forward from FY 13 into FY 14 for the higher education strategic plan.
40(i)	OLM	Allows up to $350,000 in Personal Services to be carried forward from FY 13 into FY 14.
41	DEEP	Transfers $1 million from the systems benefits charge in FY 14 and FY 15, a non-appropriated account, to the Operation Fuel account in the Department of Energy and Environmental Protection and allows up to $100,000 of the total to be used for administrative costs for Operation Fuel, Inc. The state and municipalities, as ratepayers, would incur increased costs to the extent the systems benefits charge is insufficient to cover these expenses.
42	BOR	Specifies that up to $150,000 within the Board of Regents for Higher Education in FY 14 and FY 15 shall be made available for the Institute of Municipal and Regional Policy for purposes of assisting in the development of the Connecticut specific model within the Pew-MacArthur Results First Initiative.
43(a)(b)	DESPP	Allows for carry forward funding from the Fleet Purchase account and transfers to Other Expenses for DESPP in the amount of $25,000 in FY 14 and $500 in FY 15 for the civilian medal of honor.
44	SDE	Allows for $250,000 from the School Accountability account in SDE to be used for the State Tracking and Accountability Report (STAR) System.
45	DPH	Increases the transfer of funding from newborn screening fee receipts to $1.2 million in both FY 14 and FY 15 to accommodate increased cost of testing. This is an increase of $28,287 from the FY 13 transfer.
46(a)(b)(c)(d)	OGA	Allows for carry forward funding from various accounts for OGA up to $222,000 from FY 13 into FY 14 to fund the purchase of a case management system. The carry forward funding includes $75,000 from Freedom of Information Commission, $20,000 from Office of Child Advocate, $20,000 from Office of Victim Advocate, and $107,000 from the Other Expense account.
47	DECD	Allows for carry forward funding up to $50,000 in the Office of Military Affairs account in the Department of Economic and Community Development from FY 13, of which $25,000 will be available in FY 14 and $25,000 in FY 15 for grants to ARTE INC in each fiscal year.
48(a)-(j)	OPM	Allows for the carry forward funding up to $2,007,000 from various accounts within the Office of Policy and Management and transfers these funds to the Litigation/Settlement account in FY 14. This is to fund ongoing and increased litigation costs over the biennium.
49(a)	OPM	OPM shall recommend reductions in executive branch expenditures in Other Expenses by $3,312,000 in both FY 14 and FY 15. Savings are anticipated to be achieved by curtailing and delaying purchases, where possible, in addition to other savings initiatives.
49(b)	OPM	OPM shall recommend reductions in legislative branch expenditures in Other Expenses by $140,000 in both FY 14 and FY 15. Savings are anticipated to be achieved by implementing various savings initiatives.
49(c)	OPM	OPM shall recommend reductions in judicial branch expenditures in Other Expenses by $548,000 in both FY 14 and FY 15. Savings are anticipated to be achieved by curtailing and delaying purchases, where possible, in addition to other savings initiatives.
50(a)(b)(c)(d)	DOT	Allows for carry forward funding up to $10 million from FY 13 into FY 14 and transferred into the Pay-As-You-Go account. The carry forward funding is as follows: Rail Operations ($4.2 million); Personal Services ($1.5 million), Transit Improvement Program ($200,000), and Pay-As-You-Go ($4.1 million).
51(a)(b)	DMV	Allows for carry forward funding from the Other Expenses account for DMV in the amount of $750,000 and from the Equipment account of $100,000 in FY 14 for information technology costs to implement sHB 6495 (as amended by House A) AAC the Issuance of Motor Vehicle Operator's Licenses.
52	OPM	Requires the Office of Policy and Management to recommend $10 million in reductions in municipal aid to take effect in FY 15.
53	SDE/OEC	Allows both the Commissioner of Education and the executive director of the Office of Early Childhood to use up to 25% of head start funds for the purposes of enhancing program quality contingent upon a reduction in federal funding that would otherwise reduce the number of children served. This provides the Commissioner and the executive director greater flexibility in serving the identified population.
54(a)	DEEP	Allows for up to $1,242,604 of the unexpended balance for Personal Services in the Public Utilities and Control Fund to be carried forward from FY 13 into FY 14 and transferred to Other Expenses.
54(b)	DEEP	Allows for up to $172,396 of the unexpended balance for Fringe Benefits in the Public Utilities and Control Fund to be carried forward from FY 13 into FY 14 and transferred to Other Expenses.
54(c)	DEEP	Allows for up to $685,000 of the unexpended balance for Fringe Benefits in the Public Utilities and Control Fund to be carried forward from FY 13 into FY 14 and transferred to Equipment.
55	DSS	Allows DSS and DMHAS to establish receivables for certain Medicaid expenditures. This enables the departments to receive federal revenue and make expenditures from this account with the proceeds of the state's federal reimbursement.
56	OPM	Waives the provision requiring each agency to submit a requisition for allotment to the Office of Policy and Management for funds budgeted to comply with Generally Accepted Accounting Principles (GAAP) prior to them becoming available for expenditure. Across all appropriated funds, the budget provides agencies $55.9 million in FY 14 and $76.7 million to recognize liabilities in the year in which they occur.
57	DSS	Requires the $371,656 appropriation for the Fatherhood Initiative, as reflected above in section 1, to be equally distributed among the six program vendors, resulting in approximately $61,943 each in both FY 14 and FY 15.
58	-	Allows for the use of $190.8 million in FY 13 surplus to be used as General Fund revenue in FY 14 and $30 million in FY 15.
59(a)(b)(c)	PCSW	Allows up to $10,000 of the unexpended funds in Other Expenses to be carried forward from FY 13 into FY 14 and used for the following: $5,000 for a pay equity study; $2,500 for women's heath review; and $2,500 for a homelessness study.
60(a)(b)	DRS/OSC-Fringe	Allows for up to $150,000 in Personal Services and $700,000 in Other Expenses to be carried forward from FY 13 into FY 14 for sales and use tax collection enhancements. Of the $150,000 carry forward funding, $40,000 shall be transferred to the fringe benefit accounts administered by the Comptroller to support the fringe benefit costs associated with the new position.
61(a)(b)(c)	SDE	Allows for up to $2.8 million in Magnet Schools to be carried forward from FY 13 for the following: $2.3 million in FY 14 for Sheff programming, $330,000 in FY 14 transferred to Interdistrict Cooperation for the Sound School; and $85,000 in both FY 14 and FY 15 transferred to the Neighborhood Youth Centers for the New Haven YMCA.
62 – 64	Various	See below for FY 13 Deficiency Appropriations
65	DOH	Allows up to $250,000 of the amount appropriated in section 1 of the bill for Housing/Homeless Services to be made available for the Norwich/New London Continuum of Care in FY 14 and FY 15.
66	OPM	Establishes the municipal aid adjustment grant. Funding of $2,217,456 in FY 14 and $1,358,728 in FY 15 is provided in section 1 of the bill.
67-68	DSS	Discontinues the current DSS LIA program on 1/1/14 and replaces it with the Medicaid Coverage for the Lowest Income Populations program pursuant to federal law and specifies that no state appropriation may be authorized for the program during FY 14 - FY 17. Under the Affordable Care Act, on 1/1/14, the cost of the current population of individuals covered by the LIA program as well as an expanded eligible population of low income individuals will be 100% funded by the federal government. Since the budget includes net funding of DSS Medicaid rather than the current method of gross funding, the state would no longer appropriate any funds for the cost of Medicaid services for these individuals on 1/1/14. The effect of doing so reduces the need for state appropriations by $446 million in FY 14 and $1.1 billion in FY 15.
69	-	Requires that budgetary reductions in FY 14 for the Low Income Adult Program be reflected in FY 13 in the same manner as those made for the payment of Medicare Part B premiums in FY 02 and FY 01.

FY 13 DEFICIENCY APPROPRIATIONS

Section 62 results in an increase of $142 million to the General Fund in FY 13. The FY 13 Revised Budget is currently under the spending cap by $142.2 million. Passage of the $142 million in increased FY 13 appropriations included in the bill would result in the FY 13 budget being under the spending cap by approximately $0.2 million. The following table shows the changes in agency appropriations contained in this section.

Increased General Fund Appropriations

Agency	FY 13 $
State Comptroller	1,200,000
State Comptroller - Adjudicated Claims	4,900,000
Department of Emergency Services and Public Protection	13,800,000
Department of Mental Health and Addiction Services	12,500,000
Department of Social Services	86,500,000
Department of Correction	23,100,000
TOTAL	142,000,000

Explanations of the agency's deficiency appropriation needs follow:

Office of the State Comptroller (OSC) - $1.2 million

The agency's projected FY 13 budget shortfall is composed of:

● $600,000 in Personal Services and

● $600,000 in Other Expenses.

The projected deficiency in the Personal Services (PS) account is due to the following two factors: (1) PA 12-1 of the December Special Session (the FY 13 deficit mitigation) included $829,549 in savings in PS (3.8% of the appropriation), of this total the agency will be unable to achieve $370,000, and (2) increased number of individuals that have submitted retirement requests which requires accrued payouts of approximately $230,000.

The projected deficiency in the Other Expenses account is due to the following: (1) the savings of $170,901 (5% of the appropriation) included in PA 12-1 of the December Special Session (the FY 13 deficit mitigation) are not going to be achieved, and (2) the agency has been unable to attain the targeted savings due to relatively inflexible costs. For example, the upgrade and on-going maintenance costs associated with the CORE-CT accounting system as well as postage costs. The FY 13 Revised Budget was $400,000 below historical spending levels.

Office of the State Comptroller – Adjudicated Claims - $4.9 million

The agency's projected FY 13 budget shortfall is composed of:

● $4.9 million in Adjudicated Claims.

The projected deficiency in the Adjudicated Claims account is due to: (1) higher than anticipated claims costs, (2) a recent settlement between the US Department of Education and the State Department of Education ($1.5 million), and (3) a pending class action settlement against the Department of Correction (approximately $3.3 million). It should be noted FY 12 was the first year the Adjudicated Claims account received an appropriation. Claims were previously funded out of the resources of the General Fund. Since FY 00, annual claims range from $3.9 million to $15.7 million, with a median annual claims cost of $7.6 million. The FY 13 deficiency represents 55% of total projected FY 13 expenditures.

Department of Emergency Services and Public Protection (DESPP) - $13.8 million

The agency's projected FY 13 budget shortfall is composed of:

● $13.8 million in Personal Services

The $13.8 million projected shortfall in Personal Services (PS) is primarily driven by several factors: (1) overtime spending, (2) the use of more temporary staff than budgeted, and (3) a transfer to address a deficiency in the Other Expense (OE) account. The overtime spending can be attributed to several issues including: aggressive budget assumptions, winter storms, and the Sandy Hook Elementary School incident. The Sandy Hook incident alone consumed over $1 million of overtime for the department, 9% of the total PS deficiency. Beyond overtime costs, the department has used more temporary staff than originally budgeted. During FY 13, several vacancies, including the Legal Director, have been filled using temporary worker retirees. In addition, at its May 2013 meeting, the Finance Advisory Committee approved a transfer of $2.5 million from PS to OE in response to a shortfall in that account; thereby increasing the PS shortfall by $2.5 million.

Department of Mental Health and Addiction Services (DMHAS) - $12.5 million

The agency's projected FY 13 budget shortfall is composed of:

● $12,500,000 in General Assistance Managed Care.

The anticipated General Assistance Managed Care deficiency is a result of the state not receiving a proposed waiver to limit eligibility for the Medicaid Low Income Adult (MLIA) population. The FY 13 Revised Budget included savings in DMHAS of $12.5 million associated with reducing the asset limit, counting family income and assets for qualified dependents, and imposing limits on certain medical services.

Department of Social Services (DSS) - $86.5 million

The agency's projected FY 13 budget shortfall is composed of:

● $80.5 million in Medicaid - Acute Care Services

● $6 million in Personal Services

The $86.5 million deficiency assumes a June Finance Advisory Committee (FAC) transfer that will off-set a shortfall of approximately $233.2 million (predominantly in several Medicaid accounts) through the release of $119.7 million in holdbacks as well as lapses totaling $27 million.

The shortfall in the Medicaid - Acute Care Services account is primarily due to: (1) optimistic assumptions underlying the original appropriation, and (2) continued growth in caseload.

The adopted budget included several savings initiatives that are not anticipated to be implemented. These initiatives included a waiver to reduce the Medicaid for Low Income Adults (LIA) enrollment ($37.5 million), general utilization management under the new Administrative Service Organization (ASO) structure ($47 million), enhancing Medicaid recoveries from third-party payers ($20 million), and medication administration changes ($15.4 million). These delays have resulted in higher than projected expenditures.

Additionally, the LIA population has continued its strong caseload increase, adding approximately 10,100 additional clients since June (a 12.7% increase), for a total population of 89,400 in April. The cost of these 10,100 clients represents approximately $75.8 million in additional expenditures.

The $6 million shortfall in Personal Services is primarily due to additional hiring and overtime associated with increased caseloads and modernization efforts.

Department of Correction (DOC) - $23.1 million

The agency's projected FY 13 budget shortfall is composed of:

● $24.1 million in Personal Services.

This shortfall is partially offset by lapsing funds of:

● $1 million in Inmate Medical Services.

The $24.1 million projected shortfall in the Personal Services (PS) account is primarily due to unachieved savings related to policy initiatives in the FY 13 Revised Budget. Based on current expenditure trends, the agency will achieve $9.3 million in PS savings in FY 13, or 30% of the $30.6 million in savings included in the FY 13 Revised Budget.

The $30.6 million in savings in the budget was spread across four major policy initiatives: (1) house arrest for certain offenders, (2) risk reduction credits, (3) intensive probation and (4) restructuring time off for correctional officers. Central to the savings assumptions related to these initiatives was the reduction in prison population of 3,750 inmates starting in FY 12. Since the start of the FY 12, the prison population has declined by approximately 1,250 inmates, or 2,500 fewer than necessary to achieve the assumed savings.

The $24.1 million projected deficiency is offset by a projected $1.0 million lapse in the Inmate Medical Services accounts. The lapse is due to a delay in hiring and lower than projected pharmacy costs.

Section 63 requires deficiency appropriations for the Adjudicated Claims account to be carried forward into FY 14 for claims which may settle late in the fiscal year.

Section 64 allows the Comptroller to transfer funds among Medicaid accounts prior to closing the current fiscal year. This could prevent funding in certain Medicaid accounts from lapsing or other accounts ending the year deficient.

REVENUE

Sections 70 – 113 include various revenue provisions and are identified below:

General Fund Revenue Impact (in millions)


Bill Section	Description of Change	FY 14 $	FY 15 $
70	Implement a Tax Amnesty Program	35.0	(7.0)
71 & 109	Transfer from the Tobacco and Health Trust and Stem Cell Research Funds	19.5	16.0
72	Adjust the Cap on Insurance Premiums Tax Credits	18.7	18.7
73 & 74	Extend the Surcharge on Corporate Income Tax	44.4	74.0
75	Alter Eligibility for Film Tax Credits	2.0	4.0
76	Extend the Electric Generation Tax	17.5	-
77, 78 & 113	Eliminate the Transfer to the Municipal Revenue Sharing Account	92.4	97.9
77 & 78	Establish a 60-day Exemption from the Use Tax for Boats	(2.0)	(2.0)
77 & 78	Eliminate Luxury Tax on Boats	(0.1)	(0.1)
79	Re-establish the Sales Tax Exemption on Clothing under $50	-	(11.5)
80 & 81	Implement Alternative methods for the Collection of the Sales and Use Tax	10.0	15.0
82	Require Wholesalers to Remit Sales Tax on Cigarettes	2.6	2.6
83	Reduce the Earned Income Tax Credit	21.1	11.0
84, 85 & 86	Establish Keno	3.8	27.0
87, 88 & 102	Transfers from the Special Transportation Fund	91.3	18.4
89	Transfer from the Probate Fund	1.0	-
90 & 91	Authorize Restructuring of Debt from Economic Recovery Notes	-	-
92	Delay Amortization of Historical GAAP Deficit	-	-
93 & 94	Payments to Towns	-	-
95	Authorize $40 million in Bonds to Pay for Tax Credits Claimed per the Urban and Industrial Site Reinvestment Program	20.0	20.0
96	Alter the Applicable Assessment Rates for Certain Properties in Hartford	-	-
97 & 98	Increase Fees for Mortgage Recording	5.4	5.4
99	Transfer from the Connecticut Resources Recovery Authority (CRRA)	35.0	-
100 & 101	Transfer from the Public Education and Governmental Programming Account	3.4	3.5
103 & 104	Transfer from the Banking Fund	8.0	3.0
105	Transfer from the Regional Greenhouse Gas Initiative (RGGI)	-	5.0
106 & 107	Transfer from the Clean Energy Finance and Investment Authority (CEFIA)	6.2	24.2
108	Transfer from the Municipal Video Competitiveness Account	5.0	5.0
110	Direct $40 million from the Tobacco Master Settlement Agreement (MSA) to Help Fulfill the Requirements of Generally Accepted Accounting Principles (GAAP)	(40.0)	-
111	Direct $10 million from the MSA to the General Fund	10.0	-
112	Direct $13 million from the Tobacco Litigation Settlement to Nonlapsing Fund for Enforcement Activity	-	-
TOTAL		410.2	330.1

Section 70 authorizes a tax amnesty program from September 16, 2013 to November 15, 2013 that covers all state taxes except motor carrier road taxes. This is expected to result in a General Fund (GF) revenue gain of $35 million in FY 14 and a revenue loss of $7 million in FY 15 due to an anticipated shift in the timing of the receipt of delinquent taxes. The FY 14 estimate includes amounts already identified as accounts receivables.

Sections 71 and 109 make various changes that impact the GF and the Tobacco and Health Trust Fund (THTF). The net impact of the transfers, which is reflected in the table below, is an increase in GF revenue and a decrease in the THTF balance of $9.5 million in FY 14 and $6.0 million in FY 15.

Transfers from the THTF to the GF (in millions)


Bill Section	Reason	FY 14 $		FY 15 $
Bill Section	Reason	GF	THTF	GF	THTF
71	Reduce transfer from the Tobacco Settlement Fund to the THTF	6.0	(6.0)	6.0	(6.0)
109	Transfer funding from the THTF to the GF	3.5	(3.5)	-	-
TOTAL		9.5	(9.5)	6.0	(6.0)

Section 71 also eliminates a statutory transfer of $10 million from the Tobacco Settlement Fund to the Stem Cell Research Fund in FY 14 and FY 15, which results in a $10 million increase in GF revenue in each of FY 14 and FY 15.

sSB 842, AA Authorizing and Adjusting Bonds of the State for Capital Improvements, Transportation, Elimination of the Accumulated GAAP Deficit, Restructuring of Economic Recovery Notes and Other Purposes, as favorably reported by the Finance, Revenue, and Bonding Committee, authorizes General Obligation (GO) bond funds of $10 million in each of FY 14 and FY 15 to maintain support for the Stem Cell Research Fund.

Section 72 extends, until Calendar Year 2014, the temporary cap on the maximum insurance premium tax liability that an insurer may offset through certain tax credits. The credit cap is applied at 30% for most credits, with a 55% cap applied to Film Production and Infrastructure Tax Credits and a 70% cap applied to Insurance Reinvestment Fund Tax Credits. This is expected to result in a net revenue gain of $18.7 million in each of FY 14 and FY 15.

Sections 73 and 74 extend, until Income Year 2015, the 20% Corporate Income Tax Surcharge. This is expected to result in a GF revenue gain of $44.4 million in FY 14 and $74 million in FY 15.

Section 75 establishes a moratorium on Film Production Tax Credits for income years 2013 and 2014, which is expected to result in a GF revenue gain of $2 million in FY 14 and $4 million in FY 15.

Section 76 extends the Electric Generation Tax through October 1, 2013. This results in a one-time revenue gain of $17.5 million in FY 14.

Sections 77, 78 and 113 eliminate the transfer of a portion of the Sales and Use Tax and the real estate conveyance tax, to the Municipal Revenue Sharing Account (MRSA). This is expected to result in a GF revenue gain of $92.4 million in FY 14 and $97.9 million in FY 15. This precludes the payment of grants from the MRSA, resulting in an anticipated revenue loss to municipalities of $92.4 million in FY 14 and $97.9 million in FY 15.

In addition, Sections 77 and 78 contain the following provisions:

Exempting vessels docked in the state for 60 days or less in a calendar year from the Sales and Use Tax, which is expected to result in an annual GF revenue loss of approximately $2 million.

Exempting vessels that cost over $100,000 from the 7% Luxury Tax will result in an estimated annual GF revenue loss of approximately $70,000. Under the bill, these vessels would be taxed at the regular 6.35% sales tax rate, rather than the Luxury Tax rate.

Section 79 exempts clothing and footwear costing less than $50 from the Sales and Use Tax beginning on June 1, 2015. This is expected to result in an estimated FY 15 revenue loss of $11.5 million for sales between June 1, 2015 and June 30, 2015. The estimated annual revenue loss beginning in FY 16 is $148.5 million.

Sections 80 and 81 establish a pilot program to enable the electronic remittance of the sales tax due on each sale made using consumer credit or debit cards or electronic transfers. The budgeted revenue target for this pilot program is $10 million in FY 14 and $15 million in FY 15.

Sections 80 and 81 also result in an administrative cost of $816,593 to the Department of Revenue Services (DRS) for an additional IT Analyst II position ($86,000 in wages) and additional storage capacity for the Integrated Tax Administration System ($700,000) to implement the program. Fringe benefit costs of $39,593 for the Analyst II position will impact the fringe benefit accounts within the Office of the State Comptroller (OSC). It should be noted that section 60 carries forward funding from FY 13 to FY 14 to accommodate these costs. This includes up to $150,000 in DRS Personal Services and transfers up to $40,000 of the total to the OSC fringe benefits accounts; in addition section 60 carries forward up to $700,000 in Other Expenses to accommodate these costs.

Section 82 changes the point at which the Sales and Use Tax on cigarettes is collected and remitted to the state. This is expected to result in a potential annual General Fund revenue gain of approximately $2.6 million beginning in FY 14. The estimate assumes that the sales tax non-compliance rates on cigarettes follow the same pattern as all taxable goods and services.

Section 83 reduces the state Earned Income Tax Credit (EITC) from the current level of 30% of the federal EITC to 25% in the 2013 income year and 27.5% in the 2014 income year. This is expected to result in a GF revenue gain of $21.1 million in FY 14 and $11 million in FY 15. The language provides that the rate would return to 30% in FY 16.

Sections 84 - 86 authorize the Connecticut Lottery Corporation (CLC) to operate Keno. Based on data from other states that operate Keno, this is anticipated to result in a GF revenue gain of up to $3.8 million in FY 14 and up to $27 million in FY 15 and annually thereafter. The FY 14 revenue gain is lower due to an anticipated timing delay and CLC start-up costs. In accordance with section 86, the Secretary of the Office of Policy and Management may enter into agreements with the Mashantucket Pequot Tribe and the Mohegan Tribe of Indians of Connecticut to distribute to each Tribe up to 12.5% of the gross state operating revenue from Keno. These potential distributions reduce the estimated state revenue gain over the 2014 - 2015 Biennium to $3.8 million in FY 14 and $27 million in FY 15. It is unclear what impact, if any, the operation of Keno by CLC may have on the approximately $280 - $285 million in casino gaming payments received by the state annually.

Sections 87, 88 and 102 make various transfers between the GF and the Special Transportation Fund (STF). The impact of the transfers is provided in the table below which reflects the shift of $91.3 million from the STF to the GF in FY 14 and $18.4 million from the STF to the GF in FY 15.

Transfers between the GF and the STF (in millions)


Bill Section	Reason	FY 14 $		FY 15 $
Bill Section	Reason	GF	STF	GF	STF
87	Adjust transfer to include all estimated Petroleum Gross Receipt Tax revenues from gasoline	(158.0)	158.0	(152.3)	152.3
88	Adjust statutory transfers in CGS 13b-61c	172.8	(172.8)	170.7	(170.7)
102	One-time additional transfer in FY 14 only	76.5	(76.5)	-	-
TOTAL		91.3	(91.3)	18.4	(18.4)

Section 89 transfers $1 million from the Probate Fund to the GF in FY 14.

Sections 90 and 91 permit the State Treasurer to restructure the remaining debt from issuance of Economic Recovery Notes (ERNs) that were used to finance the FY 09 GF deficit^.¹. These sections permit the Treasurer to extend, from FY 16 to FY 18, the term of this borrowing. The additional interest cost of this restructuring is estimated to be $45 million. It is anticipated that short-term interest costs associated with this issuance would also be capitalized.

Budgeted Debt Service Requirements² to Retire ERNs (in millions)

Fiscal Year	Current Law $	Bill $	Difference $
14	208	12	(196)
15	208	12	(196)
16	208	215	7
17	-	215	215
18	-	215	215
TOTAL	624	669	45

Section 92 reduces, from 15 to 13 years, the statutory term to extinguish the GAAP deficit by delaying the first payment from FY 14 to FY 16. This delay removes the need to appropriate funding in each of FY 14 and FY 15, thereby increasing the appropriation requirements for the remaining years because the amortization term required by law is reduced by two years.

Section 93 and 94 establish the following additional Local Capital Investment Program (LoCIP) purposes: (1) bikeways and greenways, (2) land acquisition, including for open space, and costs involved in making land available for public uses, (3) acquisition of technology related to implementation of DOE's Common Core State Standards, and (4) technology upgrades, including for improvements to expand public access to government information through e-portals and kiosks. They also allow LoCIP funds to be used for the following purposes in FY 13 and FY 14: (1) snow removal equipment, (2) capital expenditures made to improve public safety, and (3) capital expenditures made to facilitate regional cooperation.

Section 95 establishes a mechanism by which holders of Urban and Industrial Sites Reinvestment tax credits may redeem up to $20 million in aggregate credits in each year of the biennium through a bond-funded cash payment. This results in a $20 million GF revenue gain in each of FY 14 and FY 15 because these credits would otherwise have been redeemed against a GF revenue stream in the absence of this provision.

The credit redemption is financed through an authorization for $40 million bonding in GO bonds, effective July 1, 2013. The GF debt service cost associated with the bonds is $61 million over the 20 year term of issuance of the bonds. The cost is comprised of $21 million in interest cost and $40 million in principal payments. The figures assume that the bonds will be issued at a 5% rate of interest.

Section 96 lowers the assessment ratio in the City of Hartford for apartment or mixed-use dwellings that are newly created or converted by the Capital Region Development Authority within the Capital City Economic Development District. This shifts the tax burden away from these properties to other properties in the city.

Sections 97 and 98 increase certain mortgage recording fees from $53 to $159. This will result in a General Fund revenue gain estimated to be up to $5.4 million in both FY 14 and FY 15 due to the remittance of a portion of the fee to the state. Municipalities will also realize a revenue gain, the extent of which is not known at this time. There is no impact to the Community Investment Act (CIA) as their portion of the fee is unchanged.

Section 99 provides for a one-time payment by the Connecticut Resources Recovery Authority (CRRA), which results in $35 million GF revenue gain in FY 14. The CRRA payment is related to the transfer of care and control of the five CRRA post-closure landfills to the state.

The section will also result in an on-going cost of approximately $1 million annually to the Department of Energy and Environmental Protection to manage ongoing testing and maintenance of the landfills. Funding of $1.1 million is included in section 1 of the bill for this purpose.

Sections 100 and 101 transfer $3.4 million in FY 14 and $3.5 million in FY 15 from the Public Education and Governmental Programming and Education Technology Investment account to the GF.

Sections 103 and 104 transfer $8 million in FY 14 and $3 million in FY 15 from the Banking Fund to the GF.

Section 105 transfers $5 million in FY 15 from the Regional Greenhouse Gas Initiative (RGGI) to the GF. RGGI is greenhouse gases cap-and-trade program that subjects power plans in the state to a declining cap on the amount of CO2 they can emit. Power plants are allowed to emit more CO2 with the purchase of credits from plants that emit less than their CO2 allowance. Funds raised by this program are used for energy efficiency and renewable energy programs.

Sections 106 and 107 transfer $6.2 million in FY 14 and $24.2 million in FY 15 from the Clean Energy Finance and Investment Authority (CEFIA) to the GF.

Section 108 withholds a statutory deposit to the municipal video competition trust account. This is expected to result in a GF revenue gain of $5 million in each of FY 14 and FY 15. This precludes payments of grants to towns from this account in FY 14 and FY 15, resulting in a revenue loss to various municipalities.

Section 110 reserves up to $40 million in FY 14 of a partial settlement from a dispute with tobacco companies dating back to 2006 (for which Connecticut is anticipated to receive an additional $63 million in FY 14) to help fulfill the state's obligations to meet Generally Accepted Accounting Principles.

Section 111 results in $10 million GF revenue in FY 14 due to the settlement of the litigation resulting from the 1998 tobacco Master Settlement Agreement.

Section 112 results in $13 million received from the settlement of litigation resulting from the 1998 tobacco Master Settlement Agreement to be deposited into a nonlapsing account for enforcement of the agreement.

House “A” adopts revenue estimates for the FY 14 and FY 15 biennium. These estimates are the sum total of: 1) April 30, 2013, consensus estimates of current law revenues; and 2) revenue estimates of the various policy changes in the bill. Compared to the appropriations in the bill, the revenue estimates in the amendment would yield the surpluses indicated in the table in the beginning of the fiscal note.

The Out Years

With the exception of the one-time policies noted above, the annualized ongoing fiscal impacts identified above would continue into the future subject to inflation.

The table below reflects the projected expenditures for FY 16 - FY 18 based on the FY 14 and FY 15 budget.

Projected Expenditures FY 16 - FY 17 (in millions)


Fund	Appropriations		Projected
Fund	FY 14 $	FY 15 $	FY 16 $	FY 17 $	FY 18 $
General	17,186.0	17,504.8	18,569.1	19,258.2	20,017.4
Special Transportation	1,243.2	1,322.3	1,391.2	1,460.0	1,530.3
Other Appropriated	174.6	178.7	183.4	188.4	193.5
TOTAL	18,603.7	19,005.8	20,143.7	20,906.5	21,741.1
Growth Rates	3.6%	2.2%	6.0%	3.8%	4.0%
Over/(Under) Spending Cap	(12.0)	(162.1)	231.1	149.2	72.5

The table below compares the revenue estimates to the projected expenditures for FY 16 - FY 18 based on the FY 14 and FY 15 budget.

FY 16 - FY 18 Fund Balance (in million)


Fund	FY 16 $			FY 17 $			FY 18 $
Fund	Approp.	Revenue	Surplus/ (Deficit)	Approp.	Revenue	Surplus/ (Deficit)	Approp.	Revenue	Surplus/ (Deficit)
General	18,569.1	17,857.1	(712.0)	19,258.2	18,652.5	(605.6)	20,017.4	19,481.4	(536.0)
Special Transportation	1,391.2	1,491.2	100.0	1,460.0	1,503.9	43.9	1,530.3	1,507.2	(23.1)
Other Appropriated	183.4	184.2	0.8	188.4	188.8	0.4	193.5	193.5	(0.0)
TOTAL	20,143.7	19,532.5	(611.2)	20,906.5	20,345.2	(561.2)	21,741.1	21,182.1	(559.1)

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.