OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

HB-5596

AN ACT MAKING ADJUSTMENTS TO STATE EXPENDITURES AND REVENUES FOR THE FISCAL YEAR ENDING JUNE 30, 2015.

As Amended by House "A" (LCO 5271)

House Calendar No.: 504


OFA Fiscal Note

State & Municipal Impact: See Below

Explanation

The bill contains a revised budget package for FY 15, spending adjustments for FY 14 and various revenue changes for FY 15.

The bill includes:

1) Net reductions to Original FY 15 appropriations in all funds of $2.2 million.

2) Net reductions in Original FY 15 General Fund appropriations of $40.4 million.

3) Carry forward funding provisions totaling $6.5 million (of which $5.2 million reduces the FY 14 estimated surplus).

4) Provisions to implement the budget.

5) Deficiency funding of $58 million in FY 14 for various agencies.

6) Various policy changes that yield General Fund net revenue increases of $2.9 million in FY 15.

7) Revenue estimates as adopted by the Finance, Revenue and Bonding Committee 5/3/14.

FY 15 Revised Fund Balance (in millions)

Fund

Revenue $

Appropriations $

Surplus/

(Deficit) $

General

17,459.4

17,457.2

2.2

Transportation

1,328.4

1,321.6

6.8

Other Appropriated

216.2

214.5

1.7

TOTAL

19,003.9

18,993.2

10.7

APPROPRIATIONS

Sections 1-7 include the FY 15 changes to the original appropriations resulting in a reduction of $2.2 million, for total appropriations of $18.9 billion for the nine appropriated funds for FY 15. The table below summarizes the appropriations by fund.

FY 15 Revised Appropriations

Item

Original $

Revised $

Difference $

Gross Appropriations

General Fund

17,656,098,266

17,589,255,576

(66,842,690)

Special Transportation Fund

1,333,312,395

1,332,563,162

(749,233)

Banking Fund

27,845,849

28,791,624

945,775

Insurance Fund

31,968,453

68,344,562

36,376,109

Consumer Counsel and Public Utility Control Fund

25,384,201

25,589,345

205,144

Workers' Compensation Fund

24,789,229

26,157,484

1,368,255

Mashantucket Pequot and Mohegan Fund

61,779,907

61,779,907

-

Regional Market Operation Fund

941,498

1,029,273

87,775

Criminal Injuries Compensation Fund

2,787,016

2,787,016

-

Total Gross Appropriations

19,164,906,814

19,136,297,949

(28,608,865)

General Fund (GF) Lapses

Unallocated Lapse

(91,676,192)

(91,676,192)

-

Unallocated Lapse – Legislative

(3,028,105)

(3,028,105)

-

Unallocated Lapse – Judicial

(7,400,672)

(7,400,672)

-

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

General Lapse – Executive

(13,785,503)

(9,678,316)

4,107,187

General Lapse – Judicial

(401,946)

(282,192)

119,754

General Lapse – Legislative

(56,251)

(39,492)

16,759

Municipal Opportunities and Regional Efficiencies Program

(10,000,000)

(10,000,000)

-

GAAP Lapse

(7,500,000)

-

7,500,000

Statewide Hiring Reduction - Executive

(16,675,121)

(8,060,000)

8,615,121

Statewide Hiring Reduction - Judicial

(3,434,330)

(1,660,000)

1,774,330

Statewide Hiring Reduction - Legislative

(579,285)

(280,000)

299,285

Total GF Lapses

(158,537,405)

(132,104,969)

26,432,436

Transportation Fund (TF) Lapses

Unallocated Lapse

(11,000,000)

(11,000,000)

-

Total TF Lapses

(11,000,000)

(11,000,000)

-

Net Appropriations

General Fund

17,497,560,861

17,457,150,607

(40,410,254)

Special Transportation Fund

1,322,312,395

1,321,563,162

(749,233)

Banking Fund

27,845,849

28,791,624

945,775

Insurance Fund

31,968,453

68,344,562

36,376,109

Consumer Counsel and Public Utility Control Fund

25,384,201

25,589,345

205,144

Workers' Compensation Fund

24,789,229

26,157,484

1,368,255

Mashantucket Pequot and Mohegan Fund

61,779,907

61,779,907

-

Regional Market Operation Fund

941,498

1,029,273

87,775

Criminal Injuries Compensation Fund

2,787,016

2,787,016

-

TOTAL NET APPROPRIATIONS

18,995,369,409

18,993,192,980

(2,176,429)

Spending Cap

The bill is under the spending cap by approximately $23.9 million in FY 15. This is $142.3 million closer to the cap than the original FY 15 budget, which is under the spending cap by $166.2 million. Of the reduction in cap room, $106.1 million is attributable to a recalculation of the allowable growth rate from 2.4% to 1.7%.

Growth Rate

The FY 15 Revised Budget growth rate for the General Fund is 2% and for all appropriated funds is 2.5% over FY 14 estimated expenditures. See the table below for details.

Growth Rate of Appropriations (by fund – in millions)

Fund

FY 14 Estimated Expenditures $

FY 15
Original $

FY 15
Revised $

Change From FY 14 Estimated to FY 15 Revised

General

17,108.1

17,497.6

17,457.2

349.1

2.0%

Transportation

1,243.2

1,322.3

1,321.6

78.4

6.3%

Other Appropriated

174.6

175.5

214.5

39.9

22.8%

TOTAL

18,525.9

18,995.4

18,993.2

467.3

2.5%

Sections 8 - 31, 39 and 40 relate to specific budget actions identified below.

Section

Agency

Description

8*

SOS

Allows for $60,000 in Personal Services to be carried forward from FY 14 into FY 15 and transferred to Other Expenses for programming costs for the online business registration system.

9

DSS/DDS

Allows DSS to establish receivables for the reimbursement anticipated from projects related to DDS' Medicaid waiver management system. This is an accounting mechanism necessary to ensure the receipt of federal revenue related to these projects.

10*

DOH

Allows for $1,650,000 in Housing/Homeless Services to be carried forward from FY 14 into FY 15. Of the total, $1 million shall be used for rental assistance and $650,000 for rapid rehousing.

11

DPH

Increases the transfer of funding from the newborn screening fee receipts to $1.7 million in FY 15 to accommodate increased cost of testing. This is an increase of $585,000 from the FY 14 transfer and a corresponding General Fund revenue loss.

12

SSMF

Allows for the unexpended balance in the Soldiers', Sailors' and Marines' Fund Personal Services account to be carried forward from FY 14 into FY 15 for expenses incurred. It is anticipated that $10,000 will be available to be carried forward.

13

DMHAS

Requires that DMHAS receive 100% of reimbursement (or an alternative amount identified by the agency) for private providers where their actual expenditures are less than the amount received by the department for FY 15.

14*

DEEP

Allows for $40,000 in Emergency Spill Response to be carried forward from FY 14 into FY 15 and transferred to Other Expenses for marketing costs for free park admission weekend.

15*

DRS

Allows for $80,000 in Personal Services to be carried forward from FY 14 into FY 15 and transferred to Other Expenses for modifications to the tax systems and forms related to changes to the CT Higher Education Trust plans and implementation of the CHET Baby Scholars program.

16*

DEEP

Allows for $600,000 in Solid Waste Management to be carried forward from FY 14 into FY 15 for the comprehensive materials management strategy.

17(a)*

OEC

Allows for $450,000 in OEC's School Readiness to be carried forward from FY 14 into FY 15 and transferred to Other Expenses for developing the state-wide universal pre-kindergarten plan.

17(b)*

OEC/DOH

Allows for $600,000 of DOH's Tax Relief for the Elderly Renters to be carried forward from FY 14 into FY 15 and transferred to OEC's School Readiness Quality Enhancement to be available for universal pre-kindergarten planning grants at the district and regional levels.

17(c)*

OEC

Allows for $1 million in OEC's Child Care Services to be carried forward from FY 14 into FY 15 and transferred to School Readiness for additional start-up costs for the additional pre-kindergarten seats in school readiness programs.

17(d)*

OEC/DOH

Allows $275,000 in DOH's Tax Relief for the Elderly Renters to be carried forward from FY 14 into FY 15 and transferred to OEC's School Readiness for start-up costs for additional pre-kindergarten seats in school readiness.

18

SDE

Provides a list by town of the equalization aid grant amounts for FY 15. The total ECS amount by town for FY 15 is $2,039.5 million, funding is included in section 1 to support this distribution.

19(a)

OTT

Transfers $4.4 million of the CT Student Loan Foundation financial assets to the CHET Baby Scholars Trust administered by the Office of the State Treasurer.

19(b)

BOR

Transfers $19 million from the financial assets of the CT Student Loan Foundation to the Board of Regents in FY 15. This combined with $23 million appropriation to the Board of Regents in section 1 results in a total of $42 million for Transform CSCU.

19(c)

DHE

Transfers $1.6 million from the Connecticut Student Loan Foundation into the Governor's Scholarship program within the Office of Higher Education. Section 1 includes an off-setting reduction in the Governor's Scholarship account in an equal amount. The Connecticut Student Loan Foundation is a non-profit corporation that administers loans within the Federal Family Education Loan Program (FFELP) and alternative student loan programs. The loans made or acquired by CSLF were financed through the issuance of bonds that are secured by the revenues received from such loans.

20

SDE

Specifies that up to $100,000 of the After School Program funding in SDE in FY 15 shall be available to Plainville ($50,000), Thompson ($25,000) and Montville ($25,000) school districts.

21

DMHAS/

SDE/DECD

Transfers $11.5 million from the Tobacco Settlement Funds to the following: (1) $10 million to DMHAS which includes $3 million for Grants for Substance Abuse and $7 million for Grants for Mental Health Services; (2) $1 million to SDE for After School programs identified in the section; and (3) $500,000 to DECD for a grant to Connecticut Innovations for regenerative medicine and bioscience grant award management.

22

OPM

Removes the assessed value of Bradley Airport property in the towns of Windsor Locks, Windsor, Suffield, and East Granby from the State-Owned property PILOT grant formula. This will increase State Owned PILOT payments to 165 municipalities (and various other boroughs) and reduce State Owned property payments to the four above mentioned towns with Bradley Airport land. The revenue loss to the four above mentioned towns will be mostly offset through direct payments (Sec. 58-61 of PA 13-277) from the Connecticut Airport Authority for the Bradley Airport land.

23

DEEP

Transfers $500,000 from the systems benefits charge, a non-appropriated account, to the Operation Fuel account in the Department of Energy and Environmental Protection.  The state and municipalities, as ratepayers, would incur increased costs to the extent the systems benefits charge is insufficient to cover these expenses.

24

DOL

Allows for $1,345,600 in Workforce Investment Act account funding to be carried forward from FY 14 in to FY 15 and transferred to Personal Services.  Section 1 includes an off-setting reduction to Personal Services in an equal amount, thus resulting in no net fiscal impact

25

JUD

Sets aside up to $100,000 from the Judicial Department Children of Incarcerated Parents account to the Institute for Municipal and Regional Policy - Central Connecticut State University and shall be made available to the New Haven Family Alliance outreach worker program.

26

OPM

Changes the recipient, from the Chester Addison Community Center to Domus of Stamford, of a $100,000 grant from the Youth Services Prevention account within the Office of Policy and Management.

27

SDE

Provides funding of $1.2 million to the City of Bridgeport in FY 14. Additionally, Bridgeport's ECS grant is increased by $700,000 to assist the city in meeting their minimum budget requirement. The increase of $700,000 results in total ECS funding of $179.6 million for Bridgeport which is included in section 1 of the bill.

28

DPH

Provides additional funding of $25,000 from the Tobacco and Health Trust Fund (THTF) in FY 15 for emergency medical services (EMS) coordinators. THTF support of $500,000 was included in Section 20 of PA 13-184 in both FY 14 and FY 15 for EMS coordinators. This will reduce the THTF balance by $25,000.

29

DSS

Allows DSS to revise the statutory pharmacy reimbursement mechanism under the Medicaid program should the federal government require such a change. It is anticipated that any such revision will be structured to maintain the current level of state expenditures for this benefit

30

OPM/

Various

OPM shall recommend reductions in: executive branch expenditures by $9,678,316, legislative branch expenditures by $39,492, and Judicial Department expenditures by $282,192. There is a corresponding $10 million budgeted lapse included in Section 1.

31

OPM/

Various

OPM shall recommend reductions for Personal Services in: executive branch expenditures by $8,060,000, legislative branch expenditures by $280,000, and Judicial Department expenditures by $1,660,000. There is a corresponding $10 million budgeted lapse included in section 1.

39*

DHE

Allows $686,538 of the Minority Advancement program, within the Office of Higher Education to lapse, in FY 14. This account is a non-lapsing account that would have otherwise resulted in this funding being carried forward from FY 14 into FY 15.

40*

OSC/DSS

Allows for $400,000 in Medicaid to be carried forward from FY 14 into FY 15 and transferred to: $170,000 to Personal Services in OSC, $186,000 to Other Expenses in OSC, $13,000 OSC-Fringe Benefits, Social Security Tax; and $31,000 OSC-Fringe Benefits, Employee Health Service Cost. Funding will support a market feasibility study and a public retirement plan for CT employers.

*Denotes items that impact the FY 14 General Fund surplus.

FY 14 DEFICIENCY APPROPRIATIONS

Sections 41 - 44 makes various FY 14 appropriation increases and reductions that results in a Transportation Fund increase of $1 million offset by a General Fund reduction of $1 million. These sections reduce, by $9 million, the amount by which the FY 14 budget is under the spending cap. This is due to a $9 million reduction of appropriations in Debt Service, which is exempt from the spending cap, and a commensurate increase in areas that are subject to the spending cap. The FY 14 budget is under the spending cap by $9.4 million; with passage of the bill, the FY 14 budget would be under the spending cap by approximately $400,000. The table below shows the changes in agency appropriations contained in these sections.

FY 14 Deficiency - Changes in Appropriations (in millions)

Agency

$ Amount

Section 41 - General Fund Increases:

 

Department of Administrative Services

8.0

Department of Emergency Services and Public Protection

4.8

Department of Economic and Community Development

3.0

Office of the Chief Medical Examiner

0.1

Department of Education

10.4

Public Defenders

6.7

OSC - Adjudicated Claims

6.2

DAS - Workers' Compensation

2.8

Total - General Fund (GF)

42.0

Section 42 - General Fund Reductions:

 

Department of Social Services (Medicaid)

(43.0)

Net GF Impact

(1.0)

Section 43 - Transportation Fund Increases:

 

Department of Transportation

13.7

State Comptroller - Fringe Benefits (Active Health)

1.5

DAS - Workers' Compensation

0.8

Total - Transportation Fund (TF)

16.0

Section 44 - Transportation Fund Reductions:

 

Department of Motor Vehicles

(2.0)

Department of Transportation

(4.0)

Debt Services - State Treasurer

(9.0)

Total -Transportation Fund (TF)

(15.0)

Net TF Impact

1.0

TOTAL - All Funds Impact

-

Section 41 increases the General Fund appropriations to various agencies and accounts by $42 million in FY 14. Below includes the explanation of the General Fund agency's deficiency appropriations needs:

Department of Administrative Services - $8 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $6.5 million in Personal Services and

● $1.5 million in State Insurance and Risk Management.

The total Personal Services shortfall of $7.6 million in the Personal Services account (15.5% of appropriation) is due to the November 7, 2013 FAC approval transferring $8 million from Personal Services to the State Insurance and Risk Management Operations account. Funding was needed in the State Insurance and Risk Management Operations account as the state settled and paid two large automobile claims earlier this fiscal year. One claim involved a State Trooper who hit a pedestrian in Shelton on May 29, 2010. This claimant was awarded $9 million. In the second claim, there was a fatal traffic accident involving a UConn student and a student operated campus shuttle bus on March 22, 2011. This claim settled for $6 million. The state is responsible for paying a $4 million deductible on each claim. The $7 million balance on these two claims will be covered by the state's insurance carrier. This shortfall is partially offset by $1.1 million lapsing funds from the following accounts: $783,700 in IT Services, $183,000 in Rents and Moving, and $153,500 in other various accounts.

The projected shortfall of $1.5 million in the State Insurance and Risk Management Operations account (12% of appropriation) is due to additional claims that are due before the end of FY 14.

Department of Emergency Services and Public Protection - $4.8 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $3.9 million in Personal Services,

● $500,000 on Other Expenses and

● $400,000 in Workers' Compensation Claims.

The $3.9 million projected shortfall in Personal Services arises, in part, from lower assessments on each casino for law enforcement services. PA 13-170 enabled the transition of law enforcement duties at each casino from DESPP to tribal police forces. The state negotiated assessments with each tribe setting law enforcement reimbursements at $1.2 million ($600,000 per tribe) for FY 14. Tribal reimbursements totaled $4.2 million in FY 13, $4.7 million in FY 12, and $7.2 million in FY 11. Given that DESPP staffing levels were not correspondingly reduced, the lower assessment created a shortfall in Personal Services of approximately $3 million. The remainder of the overall Personal Services shortfall ($900,000) is attributable to unbudgeted overtime.

The $500,000 shortfall in Other Expenses is driven primarily by payments made to several state National Guards under the Emergency Management Assistance Compact for work during the February 2013 snow storm. DESPP has paid approximately $390,000 in FY 14 for such services. The Workers' Compensation Claims shortfall is due to aggressive budgeting assumptions and higher than anticipated claims costs.

Department of Economic and Community Development - $3.0 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $3.0 million in Capital Region Development Authority.

The projected shortfall in the Capital Region Development Authority account is due to the lease agreement between the state and the City of Hartford regarding the XL Center. The Capital Region Development Authority (CRDA) negotiated a new ten year lease agreement with the City of Hartford effective July 1, 2013. The lease provides up to $3 million in rent payments in both FY 14 and FY 15 and up to $2.6 million per year thereafter from net operating revenue from the facility.

The state appropriates funding to CRDA, a quasi-public state agency, to provide supplemental support of its administrative and operational costs which include the administration of the XL Center. Prior to this new agreement, the former Connecticut Development Authority (now Connecticut Innovations, Inc.) leased the facility from the City of Hartford on behalf of the state for over 20 years.

Office of the Chief Medical Examiner - $0.1 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $100,000 in Other Expenses.

The projected shortfall in Other Expenses (OE) is primarily a result of increased cost associated with body transport (a contracted service). Also, contributing to the shortfall are the costs for laboratory services, the fleet pool, gas and medical laboratory supplies. OE expenditures are estimated at $1.4 million. This is $560,000 more than the five-year OE expenditure average (from FY 09 - FY 13). The total shortfall of $490,000 is partially offset by $390,000 available funding in other accounts, mostly PS (due to six unfilled vacancies).

State Department of Education - $10.4 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $10.4 million in Magnet Schools.

At the May 1, 2014 FAC meeting, $9.6 million was transferred from various account to the Magnet School account to offset the $19 million deficiency. The overall magnet shortfall represents 7.2% of the FY 14 appropriation of $265.5 million. The Magnet School account appropriation has increased by approximately $23 million from FY 13 to FY 14; this represents a growth of approximately 8.6%. The projected shortfall in the Magnet School account is due to the following three factors: (1) increased enrollment and corresponding transportation costs of $6.4 million; (2) prekindergarten tuition payments of $5.4 million; and (3) supplemental transportation payments of $7.2 million.

Public Defenders - $6.7 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $4.9 million in Personal Services and

● $1.8 million in Expert Witnesses.

The projected shortfall in the Personal Services account is due to an early release of a portion of this account's fourth quarter allotment in order to allow a FAC transfer from this account to the Assigned Counsel accounts.

The shortfall in the Assigned Counsel – Criminal account is due to: (1) eliminating the backlog of approximately 400 habeas cases by hiring law firms with expertise in address these cases, which has resulted in approximately $2.2 million of the projected shortfall in this account, and (2) a new payment and billing system that has accelerated payments made to attorneys by up to four months, which has resulted in approximately $2.4 million of the projected shortfall in this account.

In addition, approximately $300,000 of the early released allotment was used to transfer funds to the Assigned Counsel – Child Protection account. These funds were necessary due to two main factors: (1) this account carried over $698,000 in child protection attorney bills from FY 13 to FY 14, and (2) the number of child protection cases is anticipated to grow from 8,320 in FY 13 to more than 10,000 cases in FY 14.

The projected shortfall of $1.8 million in the Expert Witness account is due to the unexpected payment of an expert witness.  The billing submitted for the expert witness was for services rendered from 2008-2013 on behalf the In Re Racial Disparities in Death Penalty Cases.

Office of the State Comptroller - Adjudicated Claims - $6.2 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $6.2 million in Adjudicated Claims.

The projected shortfall in the Adjudicated Claims account is due to higher than anticipated claims costs and the recent settlement between the state and Capital Properties for $6.2 million. The projected shortfall represents 62% of total FY 14 projected expenditures. 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 03, annual claims range from $3.9 million to $15.7 million, with a median annual claims cost of $7.6 million.

DAS - Workers' Compensation Claims - General Fund - $2.8 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $2.8 million in Workers' Compensation Claims.

The projected shortfall in the Workers' Compensation Claims account within the General Fund (this account supports General Fund agencies without a separate workers' compensation appropriation), is primarily due to the following factors: (1) increased utilization of services, (2) employees remaining on workers' compensation longer, and (3) increasing medical expenditures. The following table reflects average monthly expenditure and claims trends for the General Fund account for the period July through March for FY 13 and FY 14.

Average Monthly Workers' Compensation Claims – GF

 

FY 13 $

FY 14 $

Change

Number of Claims

375

398

6.1%

Cost Per Claim

2,417

2,599

7.5%

Total Indemnity Costs

1,028,896

1,161,567

12.9%

Total Medical Costs

1,078,538

1,048,045

-2.4%

The estimated shortfall in this account is approximately 8.8% of total FY 14 estimated expenditures.

Section 42 reduces the Medicaid appropriation in FY 14 in the Department of Social Services by $43 million. Below includes the explanation of the available funding:

Department of Social Services - $43 million

The reduction to the FY 14 appropriation included in the bill for this agency is composed of:

● $43 million in Medicaid.

Funding is available due to a one time transfer of $67 million between the Disproportionate Share-Medical Emergency Assistance (DSH) account and the Medicaid account. The transfer was the result of the reconciliation of the net appropriation of the Medicaid account which took place in the biennial budget.

Section 43 increases by $16 million the appropriation in FY 14 to various agencies and accounts in the Transportation Fund. Below includes the explanation of the Transportation Fund agency's deficiency appropriations needs:

Department of Transportation (DOT) - $13.7 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $7 million in Personal Services,

● $2.1 million in Other Expenses,

● $4 million in Bus Operations and

● $600,000 in ADA Para-transit Program.

The $7 million projected shortfall in the Personal Services account is driven by the March 6, 2014 Finance Advisory Committee (FAC) transfer of $7 million from Personal Services to Other Expenses. This transfer was to cover a shortfall in the Other Expenses account due to higher than budgeted storm related costs for snow and ice removal. The Department of Transportation's (DOT) snow and ice removal budget is based on an average of 12 storms per year, and to date there have been approximately 15 storms. Due to winter storm costs, funding was needed for the following reasons: (1) higher than average storm costs for material and contractual services, (2) increased fuel usage to supply the 84 fuel facilities used by all state agencies and (3) equipment maintenance and repair of the department's fleet. Currently, 248 of DOT's 632 truck fleet, or 39% are past the 12 year useful lifecycle.

The $4 million projected shortfall in the Bus Operations account is driven by: (1) a $1 million unbudgeted claim related to a fatality that was settled in June 2013 and (2) higher than anticipated expenditure trends. The $600,000 projected shortfall in ADA Para-transit Program account is also due to higher than anticipated expenditure trends.

The $2.1 million projected shortfall in the Other Expenses account is driven by: (1) $1.8 million in unbudgeted information technology costs and (2) higher than budgeted storm related costs for snow and ice removal.

Office of the State Comptroller - Fringe Benefits - $1.5 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $1.5 million in State Employees' Health Service Costs.

The projected shortfall in the State Employees' Health Service Costs account within the Special Transportation Fund is due to medical claims costs (including pharmacy) being 3.4% higher than anticipated for employees of the Departments of Transportation and Motor Vehicles. Average monthly expenditures for the period July through April are 16.2% higher than the same period in FY 13.

DAS - Workers' Compensation Claims - Transportation Fund - $0.8 million

The FY 14 appropriation included in the bill for this agency is composed of:

● $0.8 million in Workers' Compensation Claims.

The projected shortfall in the Workers' Compensation Claims account within the Special Transportation Fund (this account supports the Departments of Motor Vehicles and Transportation), is primarily due to the following factors: (1) increased utilization of services, (2) employees remaining on workers' compensation longer, and (3) increasing medical expenditures. The estimated shortfall in this account is approximately 13.2% of total FY 14 estimated expenditures.

The following table reflects average monthly expenditure and claims trends for the Special Transportation Fund for the period July through March for FY 13 and FY 14.

Average Monthly Workers' Compensation Claims - TF

 

FY 13 $

FY 14 $

Change

Number of Claims

49

50

1.7%

Cost Per Claim

2,527

2,474

-2.1%

Total Indemnity Costs

269,812

294,862

9.3%

Total Medical Costs

349,107

411,659

17.9%

Section 44 reduces by $15 million the appropriation in FY 14 to various agencies and accounts in the Transportation Fund. Below includes the explanation of the Transportation Fund agency's available funding:

Department of Transportation (DOT) - $4 million

The reduction to the FY 14 appropriation included in the bill for this agency is composed of

● $4 million in Pay As You Go Transportation Projects.

Funding is available in the Pay As You Go Transportation Projects account due to slower than anticipated expenditure trends. $2.0 was transferred as part of the March 6, 2014 Finance Advisory Committee (FAC) meeting to the Other Expenses account to cover costs related to higher than budgeted storm related costs for snow and ice removal. Subsequently, the Department of Transportation received $2.0 million in Federal Highway funds that were used for pay as you go transportation projects such as inspection of local bridges between 6' and 20' in length.

Department of Motor Vehicles (DMV) - $2 million

The reduction to the FY 14 appropriation included in the bill for this agency is composed of:

● $1.5 million in Personal Services and

● $500,000 in Other Expenses.

Funding is available in the Personal Services account due to delays in hiring 41 positions which has resulted in lower than anticipated expenditures. Funding is available in the Others Expenses account is due to slower than anticipated expenditure trends.

Debt Services - Treasurer - $9 million

The reduction to the FY 14 appropriation included in the bill for this agency is composed of

● $9 million in Debt Services.

The funds are available because: (1) the Special Tax Obligation (STO) bond issuance that was scheduled for October 2013 was delayed until November 2013 and (2) the assumed interest rate for the issuance was 6.00% and the actual interest rate was 3.67%.

REVENUE

The table below contains the revenue estimates adopted by the Finance, Revenue and Bonding Committee on 5/3/14.

Finance, Revenue and Bonding Committee Revenue Estimates (in thousands)

Item

FY 15 Original $

FY 15 Revised $

General Fund (GF)

Taxes

Personal Income Tax

9,399,800

9,264,500

Sales & Use Tax

4,164,800

4,168,000

Corporation Tax

749,300

704,300

Public Service Tax

284,700

295,600

Inheritance & Estate Tax

180,100

173,000

Insurance Companies Tax

277,600

256,200

Cigarettes Tax

379,500

360,900

Real Estate Conveyance Tax

150,800

186,900

Oil Companies Tax

35,500

34,800

Electric Generation Tax

-

-

Alcoholic Beverages Tax

60,200

60,700

Admissions & Dues Tax

37,300

38,900

Health Provider Tax

514,500

509,500

Miscellaneous Tax

20,200

95,200

Subtotal - Taxes

16,254,300

16,148,500

Less Refunds

(1,115,600)

(1,105,100)

Less Earned Income Tax Credit

(121,000)

(120,700)

Less R&D Credit Exchange

(6,200)

(6,800)

Net - Taxes

15,011,500

14,915,900

Other Revenue

Transfers - Special Revenue

338,400

323,100

Indian Gaming Payments

280,400

278,500

Licenses, Permits and Fees

274,400

256,239

Sales of Commodities

39,400

43,500

Rents, Fines and Escheats

116,600

118,400

Investment Income

1,600

600

Miscellaneous

170,900

161,900

Less Refunds of Payments

(71,300)

(72,900)

Net - Other Revenue

1,150,400

1,109,339

Other Sources

Federal Grants

1,227,900

1,299,613

Transfer From Tobacco Settlement

106,000

119,960

Transfers (To)/From Other Funds

4,900

14,550

Net - Other Sources

1,338,800

1,434,123

GF TOTAL

17,500,700

17,459,362

Special Transportation Fund (STF)

Taxes

Motor Fuels Tax

499,100

503,900

Oil Companies Tax

379,100

379,100

Sales Tax- DMV

79,900

82,600

Less Refunds

(6,600)

(6,600)

Net - Taxes

951,500

959,000

Other Sources

Motor Vehicle Receipts

237,500

238,100

Licenses, Permits and Fees

139,100

138,900

Interest Income

4,100

5,000

Federal Grants

13,100

12,100

Transfers From/(To) Other Funds

(19,400)

(21,500)

Refunds of Payments

(3,200)

(3,200)

Net - Other Sources

371,200

369,400

STF TOTAL

1,322,700

1,328,400

Mashantucket Pequot and Mohegan Fund (MP&MF)

Transfers from General Fund

61,800

61,780

MP&MF TOTAL

61,800

61,780

Soldiers, Sailor and Marines Fund (SS&MF)

Transfers from the Trust Fund

-

-

SS&MF TOTAL

-

-

Regional Market Operating Fund (RMOF)

Rentals and Investment Income

1,000

1,029

Use of fund balance from prior years

-

-

RMOF TOTAL

1,000

1,029

Banking Fund

Fees and Assessments

22,301

28,800

Use of Fund Balance from Prior Years

5,546

-

BANKING FUND TOTAL

27,847

28,800

Insurance Fund

Fees and Assessments

31,968

68,345

INSURANCE FUND TOTAL

31,968

68,345

Consumer Counsel and Public Utility Control Fund (CC&PUCF)

Fees and Assessments

25,384

25,600

CC&PUCF TOTAL

25,384

25,600

Workers' Compensation Fund (WCF)

Fees and Assessments

25,235

27,251

WCF TOTAL

25,235

27,251

Criminal Injuries Compensation Fund (CICF)

Restitutions

3,310

3,355

Use of Fund Balance from Prior Years

-

-

CICF TOTAL

3,310

3,355

TOTAL

18,999,944

19,003,922

Sections 11, 32 - 38, 45 – 54 and 56 make various changes that result in a total General Fund revenue increase of $2.9 million. This revenue is included in the above schedule adopted by Finance, Revenue and Bonding Committee. The changes are listed below.

General Fund Revenue Impact (in millions)

Section

Description of Change

FY 15 $

32, 33

Transfer from Tobacco Health Trust Fund

4.0

34, 35, 36

Deposit Funds from Tobacco Litigation

19.5

37

Transfer from Biomedical Research Trust Fund

1.0

38

Transfer from the Private Occupational School Student Protection Account

0.5

45

Connecticut Television Network

(0.7)

46

Municipal Revenue Sharing Account

(12.7)

47

Sales Tax Exemption on Clothing Less than $50

11.5

48

Sales Tax Exemption on Nonprescription Drugs

(4.2)

49

Admissions Tax Exemption for XL Center

(1.0)

50

Personal Income Tax on Teachers' Pensions

-

51

Angel Investor Tax Credit

(3.0)

52,53,56

Keno Gaming

(13.5)

54

Transfer from the Special Transportation Fund

2.1

11

Newborn Screening Fees

(0.6)

TOTAL GF Impact

2.9

Section 11 increases the transfer of funding from the newborn screening fee receipts to $1.7 million in FY 15 to accommodate increased cost of testing by the Department of Public Health. This is an increase of $585,000 from the FY 14 transfer and a corresponding General Fund revenue loss.

Sections 32 and 33 transfer $4 million from the Tobacco Health Trust Fund to the General Fund in FY 15.

Sections 34, 35 and 36 reduce by $13.95 million the amount of funding set aside for GAAP accruals from the 2013 settlement of litigation under the 1998 Tobacco Master Settlement Agreement.1 Instead, these sections result in the deposit of these funds as General Fund revenue in FY 15 in addition to $5.5 million of the balance of the Tobacco Settlement Fund.

Section 37 transfers $1 million of fund balance from the Biomedical Research Trust Fund ($500,000 each in FY 14 and FY 15) to the General Fund in FY 15.

Section 38 transfers $500,000 from the Private Occupational School Student Protection account to the General Fund in FY 15. The Private Occupational School Student Protection account is an account used to make tuition refunds to students unable to complete a course at a private occupational school because the school becomes insolvent or ceases operating. It is funded by (1) quarterly assessments on private occupational schools' tuition revenue received from Connecticut students and (2) other fees related to the schools' operations.

Section 45 increases the annual revenue diversion from the public service companies' tax to support the operations of CT-N by $700,000.

Section 46 provides for a one-time revenue diversion from the sales and use tax to reimburse towns for the revenue they lost inadvertently when the Municipal Revenue Sharing account was terminated effective June 30, 2013. This termination date precluded the deposit of revenue received after the close of the fiscal year but counted toward FY 13 because the revenue was earned in that period. Funds are to be distributed in accordance with the statutory formula in effect while the account was active.

Section 47 delays by one month (from June 1, 2015 to July 1, 2015) the scheduled restoration of the sales tax exemption for clothing or footwear that costs less than $50 which results in a revenue gain of $11.5 million in FY 15. This delay pushes the revenue impact of the restoration entirely into FY 16. The annual revenue loss in FY 16 is unaffected by the bill and is estimated to be $144.6 million.

Section 48 restores the sales tax exemption for nonprescription drugs effective April 1, 2015. The year revenue loss is estimated to be $4.2 million. The annual revenue loss in FY 16 and thereafter is estimated to be $16.5 million.

Section 49 exempts any event at the XL Center in Hartford from the admissions and dues tax, which is anticipated to result in a revenue loss of approximately $1 million in FY 15 and annually thereafter.

Section 50 establishes an Income Tax exemption for teachers' pension income which is phased-in at 10% for Income Year 2015, 25% for Income Year 2016, and 50% for Income Year 2017 and annually thereafter. This results in a General Fund revenue loss of approximately $11.8 million in FY 16, $20.8 million in FY 17, and $28.8 million in FY 18 (the fully phased-in annualized level).

Section 51 extends the Angel Investor Tax Credit through FY 16. The credit is currently scheduled to sunset June 30, 2014. The annual revenue loss under the credit is approximately $3 million.

Sections 52, 53 and 56 repeal the authorization for keno gaming. PA 13-184, the FY 14 - FY 15 Biennial Budget, authorized keno gaming but it has not yet been implemented. Implementation is anticipated by January 1, 2015. The FY 15 revenue loss is estimated to be $13.5 million which is one-half of the estimated annual revenue loss of $27 million in FY 16 and thereafter.

Section 54 repeals the scheduled transfer of $2.1 million from the General Fund to the Special Transportation Fund.

Section 55 repeals section 42 of PA 13-184 that earmarked funding for the Institute of Municipal and Regional Policy (IMRP) for the Results First project.

Section 55 also repeals sections 11, 12 and 49 of PA 13-184, the biennial budget that provided OPM with holdback authority for specific budgeted lapses. These sections are no longer needed as this budget distributes these lapses in the agencies budgets.

House “A” adopts the revenue estimates for the FY 15 Revised Budget. These estimates are the sum total of: (1) April 30, 2014, consensus estimates of current law revenues; and (2) revenue estimates or targets of the various policy changes in the bill or otherwise anticipated. 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

The table below reflects the projected expenditures utilizing a current service methodology for FY 16 - FY 18 based on the FY 15 Revised Budget.

Projected Expenditures FY 16 - FY 18 (in millions)

Fund

Appropriated

Projected

FY 15 $

FY 16 $

FY 17 $

FY 18 $

General

17,457.2

18,827.5

19,693.4

20,699.8

Special Transportation

1,321.6

1,408.0

1,478.7

1,550.4

Other Appropriated

214.5

214.9

221.3

227.7

TOTAL

18,993.2

20,450.4

21,393.5

22,478.0

Growth Rates

2.5%

7.7%

4.6%

5.1%

Over/(Under) Spending Cap

(23.9)

559.1

636.1

747.5

The table below compares revenue estimates to projected expenditures for FY 16 - FY 18 based on the FY 15 Revised Budget.

Fund Balance FY 16 - FY 18 (in millions)

Fund

FY 16 $

FY 17 $

FY 18 $

Approp.

Revenue

Surplus/
(Deficit)

Approp.

Revenue

Surplus/
(Deficit)

Approp.

Revenue

Surplus/
(Deficit)

General

18,827.5

17,469.7

(1,357.8)

19,693.4

18,126.3

(1,567.1)

20,699.8

18,879.8

(1,820.0)

Special
Transportation

1,408.0

1,493.5

85.5

1,478.7

1,504.1

25.4

1,550.4

1,504.8

(45.6)

Other
Appropriated

214.9

208.9

(6.0)

221.3

212.4

(8.9)

227.7

218.9

(8.8)

TOTAL

20,450.4

19,172.1

(1,278.3)

21,393.5

19,842.8

(1,550.7)

22,478.0

20,603.5

(1,874.5)

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.

1 In May of 2013, Connecticut joined 21 other states in a partial settlement with the major tobacco companies of a dispute dating from 2006 regarding payments to the states under the 1998 MSA, from which Connecticut received $63 million. Of the $63 million total, up to $40 million was reserved to help fulfill the state's obligation to meet Generally Accepted Accounting Principles (GAAP).