OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 ↓ (860) 240-0200

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

HB-7501

AN ACT PROVIDING FOR THE CONTINUED OPERATION OF ESSENTIAL FUNCTIONS OF THE STATE.

AMENDMENT

LCO No.: 10072

OFA Fiscal Note

State Impact:

Note: App Fund=All Appropriated Funds

Municipal Impact:

Explanation

The amendment includes: 1) General Fund appropriations of $18.5 billion in FY 18 and $18.6 billion in FY 19, 2) appropriations in nine funds totaling $20.2 billion in FY 18 and $20.5 billion in FY 19, 3) revenue estimates adopted by the Finance Committee on 9/14/17, as adjusted to reflect new policies in this amendment; and 4) various other provisions. The table below compares the revenue estimates to the appropriations included in the amendment.

Comparison of FY 18 and FY 19 Appropriations to Revenue Estimates

Appropriations

Sections 1 – 9 include appropriations by agency and line items totaling $20.2 billion in FY 18 and $20.5 billion in FY 19.

Fund Summary of FY 18 and FY 19 Appropriations

Spending Cap

The amendment is under the spending cap by $244.2 million in FY 18 and $172.3 million in FY 19.  Pursuant to section 329 of the amendment, these calculations reflect: 1) an allowable growth rate based on the greater of the five-year average growth in personal income on a calendar year basis or the 12-month increase in the Consumer Price Index for All Urban Consumers, All Items Less Food and Energy on a December-over-December basis, 2) the elimination of the current exemption for certain grants to distressed municipalities, and 3) the requirement that certain non-appropriated expenditures that were previously appropriated be included under the cap.

Growth Rate

The FY 18 growth rate for the General Fund is 3.5% over the FY 17 appropriation. The FY 19 General Fund growth rate is 0.6% over FY 18. See the table below for details on other funds.

FY 18 and FY 19 Budget Growth Rates (by fund – $ in millions)

Fiscal Impact of Sections 10 - 980 are identified below.

Section 10(a) states that the Office of Policy and Management (OPM) shall recommend reductions in the General Fund in order to reduce labor-management expenditures by $700,000,000 in FY 18 and by $867,600,000 in FY 19.

Section 10(b) requires any allotment reduction to a higher education constituent unit to be credited to the General Fund, which results in a revenue gain to the General Fund.

Section 11(a) states that OPM shall recommend reductions in executive branch expenditures in FY 18 by $42,250,000 and by $40,000,000 in FY 19.

Section 11(b) states that OPM shall recommend reductions in legislative branch expenditures for FY 18 and FY 19 by $500,000.

Section 11(c) states that OPM shall recommend reductions in judicial branch expenditures FY 18 by $3,000000 and by $8,000,000 in FY 19.

Section 12 states that OPM shall recommend reductions in expenditures to achieve targeted savings in FY 18 by $56,972,184 and FY 19 by $72,442,877.

Section 13 states that OPM may make increases in allotments in any budgeted agency of the state in order to reflect budgetary costs associated with the delay in the passage of the budget in the General Fund of $20 million for the fiscal year ending June 30, 2018.

Section 14 states that OPM shall recommend reductions in expenditures to achieve savings in FY 18 by $144,016,000 and FY 19 by $177,771,000.

Section 15 states that OPM shall recommend reductions in expenditures in the Special Transportation Fund for FY 18 and FY 19 by $12 million.

Section 16 allows the Department of Social Services (DSS) and Department of Children and Families (DCF) to establish an account to allow for the receipt of reimbursement anticipated from the federal government. This allows the state to receive revenue as anticipated in the budget.

Section 17 exempts appropriations authorized for purposes of complying with Generally Accepted Accounting Principles (GAAP) from the quarterly allotment process pursuant to Section 4-85 of the Connecticut General Statutes.  This provision has no fiscal impact since these funds are non-programmatic and are only used to close out the end of the fiscal year in accordance with GAAP.

Section 18(a) allows OPM to transfer amounts from Personal Services accounts in any appropriated fund to the RSA account to reflect the impact of collective bargaining related costs.

Section 18(b) allows OPM to transfer amounts from the RSA account into any agency to give effect of salary increases and accrued payments. The appropriations in the General Fund RSA account are $312,050,763 in FY 18 and $479,497,698 in FY 19.

Section 19(a) allows for the unexpended funds for collective bargaining costs to be carried forward from FY 17 into FY 18 and FY 19. It is estimated up to $33,462,326 in the General Fund and up to $11,667,593 in the Special Transportation Fund will be carried forward.

Section 19(b) allows for the unexpended funds for collective bargaining costs to be carried forward from FY 18 into FY 19.

Section 20 allows for the transfer of funds between agencies via the use of Finance Advisory Committee (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.

Section 21(a)(b) allows for 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.

Section 22 allows for the transfer from the UConn Health Center to DSS's Medicaid account to maximize federal reimbursement. This allows the state to receive revenue as anticipated in the budget.

Section 23 directs DSS to make Disproportionate Share (DSH) payments to hospitals in the Department of Mental Health and Addiction Services (DMHAS) for operating expense and related fringes. This allows the state to receive revenue as anticipated in the budget.

Section 24 allows any appropriation made to the Department of Veterans Affairs in section 1 of the amendment to be transferred to the Medicaid account within DSS for the purpose of maximizing federal reimbursement.

Section 25 transfers $1 million in both FY 18 and FY 19 of Part B IDEA (federal funds) from SDE to the Office of Early Childhood (OEC) for the Birth-to-Three Program.

Section 26 ensures that money appropriated for the Priority School District grant, in FY 18 and FY 19 is spent in the appropriate year, and through the appropriate sub-grant. This allows eligible school districts to receive funding. The funding for FY 18 totals $38.1 million and the funding for FY 19 totals $22.3 million.

Section 27 suspends the DCF Single Cost Accounting System (SCAS), which results in savings of approximately $3.6 million in FY 18 and approximately $4.6 million in FY 19 to DCF. Pursuant to CGS Sec. 17a-17 and agency regulations, SCAS determines the per diem payment rates for in-state, private residential treatment centers. Under SCAS, increases in the allowable residential care components over the previous year rates are limited to the increase in the consumer price index plus 2%, or the actual increase in allowable costs, whichever is less.

Section 28(a)(b) requires that DDS and DMHAS receive 100% of reimbursement (or an alternative amount identified by the agency and approved by OPM) for private providers where their actual expenditures are less than the amount received by the departments for both FY 18 and FY 19. This gives the agencies discretion to allow providers to retain funds, which could reduce state savings.

Section 29 carries forward $1,040,770 from FY 17 to FY 18 for the e-court migration project.

Section 30 allows the unexpended balance of approximately $973,062 for the Commercial Vehicle Information Systems Network Project within the Department of Motor Vehicles (DMV) to be carried forward into FY 18 and FY 19.

Section 31(a)(b)(c) allows the unexpended balance of approximately $8,693,716 to be carried forward from FY 17 and available in FY 18 and FY 19 for the purpose of upgrading the registration and driver license data system within DMV.

Section 32 may result in a savings to the state by reducing the unfunded actuarial accrued liability of the State Employees' Retirement System (SERS). In addition, this will reduce potential General Fund revenue deposited as a result of over recoveries from non-General Fund sources. The impact to the SERS fund will be certified in future actuarial valuations.

Section 33 specifies that no reductions may be made to the following agency accounts: DDS-Employment and Day Services, DSS-Community Residential Services and DMHAS – Grants for Substance Abuse Services and Grants for Mental Health Services for FY 18 and FY 19. This prevents savings from being made in these accounts.

Section 34 precludes a revenue gain of $6 million in FY 18 from the Probate Court Administration Fund to the General Fund by suspending the transfer of any amount in balance over 15% of the Probate Court Administration operating costs.

Section 35 eliminates the motor vehicle mill rate cap in FY 18 and FY 19. This precludes a revenue loss to towns of about $64 million, assuming they increase their motor vehicle mill rates to the level of their current real and personal property mill rates as a result of the amendment.

Revenue Impact in Table Below

Section 92 – 97 limit GO bond allocations (beginning in FY 18), issuances (beginning in FY 19), and spending (beginning in FY 19) to two billion dollars per year, with some exemptions and requirements. Taken together, it is expected that the costs of debt repayment will be lesser going forward than if use of bonding is not limited. The overall costs, and any associated savings, will be dependent on actual use of bond funds, changes in market conditions, and changes in factors that impact the state's own costs of borrowing.

Under the bond spending limit, the Treasurer is required to produce a list of projects with allocated but unissued bonds. Subsequently, the Governor is required to provide the Treasurer a list of allowable bond fund expenditures for the following fiscal year.

Included in the allocation limit are specified amounts to be used exclusively for transportation projects, effectively reducing new allocations for non-transportation GO-funded projects to $1.6 billion for FY 18. The amount specified for transportation GO funding grows to over $700 million in 2026 and remains at this level until January 1, 2046, while the amount available for non-transportation projects declines to approximately $1.3 billion. The limits are to be adjusted using a specified inflation factor.

Transportation bond funds issued under the specified GO transportation amounts are exempt from the issuance cap, as are issuances for the CSCU 2020 and UConn 2000 bond programs.

Section 108 requires DCF and the Court Support Services Division (CSSD) of the Judicial Department to submit a plan and recommendations for the transfer of all juvenile justice programs and services from DCF to CSSD, which is not anticipated to result in a fiscal impact to the agencies.

Sections 108 and 109 require the Departments of Energy and Environmental Protection (DEEP) and the Department of Transportation (DOT) to review and make final determinations on certain regulated activities no later than 90 days, rather than a reasonable length of time, after the agencies receive applications.  If determinations are not made within the 90 day period, applications are considered approved.  This requirement is not anticipated to result in a fiscal impact to DEEP or DOT. 

Section 110 requires the Department of Agriculture (DoAg) to review and make final determinations on each aquaculture permit application no later than 90 days after the receipt of applications. After the 90 day period, if a final determination is not made by DoAg, aquaculture applications will be considered approved.

Sections 111-120 make changes to school construction statutory requirements. There is the potential for both savings and increased future costs within these changes. For instance, calculating municipal reimbursement rates based on three-year rolling averages will have specific increased or decreased costs for individual projects and municipalities, but overall state contributions, along with aggregate municipal costs, are expected to be unchanged.

These sections require the School Building Projects Advisory Council to develop three prototype school construction plans. Once established, only the portion of construction costs that resulted from used of the prototype plans will be reimbursable. There is potential savings to the state if fewer projects, or a lower portion of project costs, are eligible for reimbursement. The fiscal impact to municipalities is uncertain, dependent on whether the prototype requirements would be more or less costly than they would otherwise use for construction and whether they choose to pursue projects ineligible for the new reimbursement requirements.

Section 121 is the School Construction Priority List. It approves a total of $516.2 million in state grant commitments for school construction projects, including: (1) $485.3 million for 50 new projects on the education commissioner's project priority list and (2) $1.1 million for three previously-authorized projects that have changed substantially (more than 10%) in cost or scope.

These grants-in-aid will be financed through the issuance of up to $516.2 million in General Obligation (GO) bonds, which will be authorized in future fiscal years. No new bonds are authorized in these sections. Debt service is expected to increase in future years to the extent that projects are completed and reimbursements are sought by municipalities.

Sections 122 - 127 notwithstand certain aspects of the underlying school construction projects and reimbursement statutes. Two projects were included or altered in the priority list, with those potential impacts reflected in section 121. Four projects are described with varying expected impacts, including a project Norwich with an additional cost of approximately $1 million (financed through GO bonds). There is also likely a reduction in potential future costs, as the scope of a project previously approved for reimbursement in New London was narrowed, with the overall project costs expected to decline by up to $17 million.

Sections 128 - 134 adjust the Education Cost Sharing (ECS) formula and yield town grants totaling approximately $1.62 billion in FY 18 and $1.73 billion in FY 19.  The formula's changes include: (1) a foundation level of $9,638; (2) additional student weights of 15 percent for English Language Learners, 30 percent for students eligible for Free or Reduced Price Lunch (FRPL), and an additional 5 percent for all students that put a town above 75 percent FRPL eligibility; (3) the property portion of the state aid ratio is weighted at 70 percent and the income ratio at 30 percent; and (4) a statewide guaranteed wealth level of 1.5.  In addition, the state aid ratio is adjusted upward by between three and six percentage points, for towns with a Public Investment Community (PIC) index above 300, based on the town's precise index. Changes to ECS grants are made as follows: (1) Every town's FY 17 ECS entitlement is reduced by 22 percent to develop a new "base;" (2) for FY 18, (a) towns that need additional money to reach full funding from base receive a grant equal to the base amount plus five percent of the additional money needed, and (b) towns that have a higher base than full funding receive a grant equal to the base.  In FY 19: (1) towns that need additional money to reach full funding from base receive a grant equal to the base amount plus 15 percent of the additional money needed, and (2) towns that have a higher base than full funding receive a grant equal to the base minus 10 percent of the difference between base and full funding.  In increases and reductions are phased in gradually until full funding is reached for all towns in FY 29.

Section 135 establishes an education cost sharing grant formula review team to review the equalization aid grant formula. This could result in a potential cost to the state of less than $1,000 in FY 18 associated with mileage reimbursement for eligible members of the review team.

Sections 136 – 139 eliminate Excess Cost grants to municipalities and establish a new sliding scale for special education. The Senate Republican budget amendment provides approximately $597.6 million in special education funding that will be distributed to municipalities based on a sliding scale of 2.5% to 52% (ranked using a town's adjusted equalized net grand list per capita).

Section 140 requires every UConn professor's course load to be increased by one class.  This policy is anticipated to result in a savings of approximately $5.2 million in FY 18, as the change can be effective only for the second semester of the 2017-18 academic year, and a savings of $10.4 million in FY 19.  These savings are reflected in UConn block grant reductions.

Sections 141 – 147 provide mandate relief for local and regional boards of education. The sections make various procedural changes that could result in a savings to various local and regional school districts. The scope of the savings will be dependent upon the size of the district, the extent to which the mandate relief policies are utilized, and a school district's ability to implement the efficient policies. For some districts the savings will be significant.

Section 148 cap charter school grants within available appropriations and for FY 18 and FY 19 require that grants be proportionately reduced if the total of the grants exceeds the amount appropriated. This results in a potential savings to the state.

Section 149 makes a clarifying change that has no fiscal impact.

Section 150 caps the Roberta B. Willis Scholarship program, and does not allow the Office of Higher Education (OHE) to grant any awards to new students after FY 18. Currently, there are three cohorts of students receiving awards. Capping the number of students results in a savings to the state of approximately $12.6 million in FY 19, approximately $25 million in FY 20 and approximately $37 million in FY 21 when the grant is fully phased out.

Section 151 caps block grant support for UConn and UConn Health Center employees at salary costs of $100,000.  It is anticipated that this policy will lead to FY 19 state savings of approximately $16.27 million connected to UConn employees and $4.77 million connected to UConn Health Center employees.

Sections 152 and 153 increase the teachers' regular contribution from 6% to 7% from January 1, 2018 to June 30, 2018 and beginning July 1, 2018 increase the teacher regular contribution from 7% to 8%. The increased contribution is to be credited to the resources of the General Fund in FY 18 and FY 19. The increased contribution results in General Fund revenue of $19 million and $76 million, respectively.

Section 154 increases non-union employee contributions towards retiree health care, also known as Other Post-Employment Benefit (OPEB) contributions by 2% and reduces the state's match for those contributions by an equivalent amount. The amendment assumes savings of approximately $10.9 in the General Fund in both FY 18 and FY 19 resulting from this change.

Section 155 grants the governor the authority to transfer $20 million in FY 19 from non-appropriated accounts to the General Fund.

Section 156 requires that all collective bargaining agreement arbitration awards cannot take effect or deemed approved unless approved by the General Assembly. This may cause the delay or rejection of certain collective bargaining contracts. A delay is not anticipated to result in a fiscal impact as those contracts approved would most likely be subject to retroactive payments. A rejection of a collective bargaining contract would mean the particular bargaining unit would continue to work under the terms of the existing contract. The fiscal impact of a rejected contract is indeterminate pending the terms of the new contract.

Section 157 states that OPM, the Chief Court Administrator and the Executive Director of Legislative Management shall submit plans to the appropriations committee before September 30, 2017 detailing how the terms of the SEBAC agreement are to be implemented to non-union employees. This has no fiscal impact.

Sections 158 & 159 (1) increase employee contributions to the State Employee's Retirement System (SERS) to 7% for all employees effective July 1, 2027, (2) make various changes to the benefit formula for SERS members who retire after July 1, 2027, including eliminating a COLA until the fund reaches 80% funded and (3) eliminate overtime from the definition of salary for SERS benefit calculation after July 1, 2027. The amendment assumes savings of approximately $144 million in FY 18 and $177.8 million in FY 19. 

Section 160 does not result in a fiscal impact to the state or municipalities. The section limits collective bargaining agreements and awards after June 30, 2027 to four years.

Section 161 specifies that the Cold Case Unit account and the Shooting Taskforce account will remain in separate accounts and does not result in a fiscal impact.

Section 162 establishes a process for municipalities to reopen collective bargaining agreements to enact regional consolidation or shared service agreements. To the extent that this facilitates consolidation of municipal services, there is a savings to municipalities that will vary based on the services shared.

Section 163 has no fiscal impact from (1) extending the time by which the State Board of Mediation and Arbitration must come to a decision in an arbitration case from twenty days to sixty days, (2) requiring municipal employee organizations to provide a best last offer and any briefs within one year of the date that state binding arbitration was imposed, and (3) requiring neutral state arbitrators be selected at random.

Section 164, which requires that all Boards of Education send any contract for administrative personnel to the Town Clerk, has no fiscal impact.

Section 165 has a potentially significant savings associated with the amendment, which shields municipal reserve fund balances of 15% or less from consideration for payment resulting from an arbitration decision with municipal employees. Using the most recent data available, 117 municipalities currently have an unassigned fund balance (which represents total fund balance, less any sums designated for future purposes) of 15% or less. The savings associated with the amendment would vary depending on the municipality's ability to pay such award based on other financial and labor factors an arbitration panel must take into consideration. The amendment is expected to shield municipalities to the extent that arbitration awards are often significant sums (about 2% of wages on average), and the amendment removes a significant factor from a municipality's ability to pay.

Sections 166 - 167 increase the public works prevailing wage threshold from $400,000 to $1 million for new construction projects and from $100,000 to $500,000 for renovation and remodeling projects. This results in a significant savings to the state and municipalities primarily in bond funds (debt service payments) for new construction and renovation projects valued below these thresholds.

Section 168 does not result in a fiscal impact to the state or municipalities. The section requires the Commissioner of DSS to annually provide the committees of cognizance with notice of any Medicaid state plan amendments or waivers which may result in a savings to the state or are related to the Recommended Budget being submitted, each December. DSS is currently required to provide all state plan amendments and waivers to the committees of cognizance for consideration.

Section 169 eliminates the transfer from the Special Transportation Fund to DSS to reflect supporting the Transportation for Employment Independence program in DOT instead of DSS.

Sections 170 - 172 make SDE the lead agency for the Birth to Three program in lieu of the Office of Early Childhood (OEC). The amendment transfers Birth to Three funding of $14.7 million and related personnel to SDE. Medicaid funding associated with the Birth to Three Program is transferred to DSS.

Section 173 results in a net savings to the state Medicaid program of $80,000 in FY 18 and $90,000 in FY 19 from eliminating state support for Medicare Part D copayments in excess of $17 per month for dually eligible individuals.

Section 174 results in a net cost to the state Medicaid program of $4.9 million in FY 18 and $5.1 million in FY 19 to comply with federal requirements regarding pharmacy reimbursement for Medicaid covered prescriptions.

Sections 175 - 178 require local and regional boards of education to enroll as Medicaid providers to participate in the School Based Child Health program. This could result in a revenue gain of up to $3.2 million to various local and regional boards of education not currently participating and a corresponding revenue gain to the state.

Section 179 results in a net savings to the state Medicaid program of $2 million in FY 18 and $2.5 million in FY 19 from implementing a $1,000 annual cap on nonemergency dental care for adults.

Sections 180 – 212: (1) eliminate the Citizens' Election Program, transferring moneys received through escheat deposits from the Citizens' Election Fund (CEF) to the General Fund, also limiting the use of any potential surplus funds, and (2) raises limits on contributions to candidate and exploratory committees. These provisions are anticipated to result in a General Fund revenue gain of $23.2 million in FY 18 and $11.5 million in FY 19. Under the amendment, the current CEF balance of approximately $23.2 million is transferred to the General Fund in FY 18.  Further, under the amendment, escheat deposits of approximately $11.5 million will be deposited in the General Fund in FY 19, instead of the CEF. Similar deposits will continue annually, subject to adjustments for changes to the Consumer Price Index. The amendment also raises limits on contributions to candidate and exploratory committees which is not anticipated to have any additional impact.

Sections 213 – 215 result in potential revenue losses to the state and various municipalities by providing various tax credits, exemptions and property tax assessment freezes under the “7/7 program.” The actual revenue loss to the state is uncertain but may be significant. Because such tax benefits are not available until a business begins on the remediated property, any revenue loss is not anticipated until FY 19 at the earliest.

Sections 216 - 219 delay raises for judges until FY 20 and results in savings of approximately $1.1 million in FY 18 and $1.5 million FY 19.

Sections 220 – 225 cap various statutory grants, which results in a significant savings to the state and allows for continued payment of Sheff Magnets and enrollment caps to stay within budget and extends tuition prohibition.

Section 226 suspends the DCF Single Cost Accounting System (SCAS), which results in savings of approximately $3.6 million in FY 18 and approximately $4.6 million in FY 19 to DCF. Pursuant to CGS Sec. 17a-17 and agency regulations, SCAS determines the per diem payment rates for in-state, private residential treatment centers. Under SCAS, increases in the allowable residential care components over the previous year rates are limited to the increase in the consumer price index plus 2%, or the actual increase in allowable costs, whichever is less.

Section 227 reduces, on a pro rata basis, payments to full-time municipal health departments and health districts, pursuant to CGS Sections 19a-202 and 19a-245, in an aggregate amount equal to $512,330.

Section 228 makes changes that facilitate the utilization of federal reimbursement by DCF and DSS to support federally approved projects for which Medicaid or Title IV-E reimbursement is received by the state.

Section 229 freezes rate increases for the Temporary Family Assistance (TFA) and State Administered General Assistance (SAGA) programs, resulting in savings to DSS of $1.3 million in FY 18 and $3.7 million in FY 19.

Section 230 freezes rate increases for the supplemental assistance programs, resulting in additional savings of $261,200 in FY 18 and $751,000 in FY 19.

Sections 231 – 234 limit increases in rates paid to certain facilities with exceptions, which is anticipated to result in savings of approximately $1.5 million in FY 18 and $3.0 million in FY 19.

Section 235 limits increases in nursing home rates with certain exceptions, which is anticipated to result in savings of approximately $27.3 million in FY 18 and $42.5 million in FY 19.

Section 236 makes a technical change that conforms to current practice and has no fiscal impact.

Section 237 limits increases in rates paid to intermediate care facilities for individuals with intellectual disabilities (ICF-IDs) with certain exceptions, which is anticipated to result in savings of approximately $1.1 million in FY 18 and $2.3 million in FY 19.

Section 238 implements the savings in the budget by reducing the state's share of the Teachers' Retirement Board retiree health service cost from 33% to the FY 17 level and by reducing the state's share of the municipal retiree health insurance from 33% to the 25% level. This results in a reduction of $19.3 million in FY 18 and $24.2 million in FY 19 in the retiree health service cost account and a reduction of $1.5 million in both FY 18 and FY 19 in the municipal retiree health insurance account. The reduction in the state payment is offset by a corresponding increase in the amount paid by the retired teachers' health insurance premium account. The retired teacher share of the TRB health plan remains unchanged.

Section 239 reduces eligibility for the Medicare Savings Program (MSP), which is anticipated to result in savings of up to $46.2 million in FY 18 and $61.5 million in FY 19, with a corresponding revenue gain of $59.9 million in FY 18 and $68.5 million in FY 19.

Section 240 eliminates the Office of the State Broadband within the Office of the Consumer Counsel. This results in savings of $307,250 in both FY 18 and FY 19 to the Consumer Counsel and Public Utility Control (CC & PUC Funds).

Section 241 does not result in a fiscal impact as it redefines the definition of transportation projects in PA 17-192.

Section 242 allows the DAS Commissioner to extend any candidate list scheduled to expire on June 7, 2017 to a date not later than December 31, 2018.  This will not result in a fiscal impact.

Section 243 transfers five positions and associated Insurance Fund support of $3,115,486 for the State Innovation Model Initiative from the Office of the Healthcare Advocate to a new Office of Health Strategy (OHS) in FY 19. One position and associated Insurance Fund support of $262,978 are transferred from the Department of Insurance to OHS in FY 19. Twenty-three positions and associated General Fund support of $1,975,432 for OHCA is transferred to OHS in FY 19. A total of 29 positions and $5,353,896 is transferred to OHS in FY 19.

Sections 244 – 245 do not result in a fiscal impact as, under current law, when the Comptroller issues a monthly statement that projects a General Fund deficit that exceeds one per cent, the Governor has thirty days to file a report to the legislature outlining a plan to modify allotments in order to prevent a deficit.  Under the amendment, the threshold is reduced from one per cent to one-half of one per cent for the Governor to produce a deficit mitigation plan.

Section 246 prohibits future collective bargaining agreements between municipalities and municipal bargaining units from limiting the ability of the municipality to permit volunteer services. To the extent that this facilitates the use of volunteers in lieu of municipal employees, there is a potential savings.

Section 247 requires that the General Assembly not adopt municipal mandates without a two-thirds vote. This potentially precludes the passage of future municipal mandates.

Sections 248 – 252 provide mandate relief for local and regional boards of education. The sections make various procedural changes that could result in a savings to various local and regional school districts. The scope of the savings will be dependent upon the size of the district, the extent to which the mandate relief policies are utilized, and a school district's ability to implement the efficient policies. For some districts the savings will be significant.

Section 253 states that the Governor shall achieve General Fund savings of $19,472,184 in FY 18 and $24,042,877 in FY 19 by eliminating various executive secretary and assistant positions and requires the Department of Administrative Services to provide the personnel and business office functions for additional agencies.  This is reflected in various lapse items.

Section 254 requires OPM to conduct a pilot program related to the Pew-MacArthur cost-benefit analysis model. This has no fiscal impact.

Section 255 requires the University of Connecticut Health Center to seek private partnerships and report to the legislature by April 1.  The budget contains an associated $17.97 million UConn Health Center block grant reduction in FY 19.

Section 256 eliminates the requirement that the State Bond Commission (SBC) allocate 1% of the state building project cost for the purchase of artwork. This results in savings to General Obligation bond funds and subsequently to the General Fund in debt service costs. Historically, the 1% artwork allocation ranges from $350,000 to $1.5 million per year, dependent upon the number and cost of projects approved by the SBC each year. 

Section 257 requires the Department of Correction to bid out healthcare services provided to inmates no later than December 1, 2017.  The budget assumes $8 million in savings in FY 19 related to this initiative.

Sections 258 – 263 remove certain purchasing and contracting constraints for UConn and the UConn Health Center, which is anticipated to result in: (1) a savings of approximately $6.0 million in purchasing in FY 18 and annually thereafter, and (2) additional contract revenue of $2.0 million in FY 18 and annually thereafter. These estimates are based on purchasing and contracting totaling approximately $600 million and $200 million annually, respectively. These savings and revenue estimates are reflected in block grant reductions to UConn totaling $8.0 million in both FY 18 and FY 19.   

Sections 264 - 265 provide mandate relief for local and regional boards of education. The section makes various procedural changes that could result in a savings to various local and regional school districts. The scope of the savings will be dependent upon the size of the district, the extent to which the mandate relief policies are utilized, and a school district's ability to implement the efficient policies. For some districts the savings will be significant.

Section 266 increases employee contributions for eligible employees to the Judges', Family Support Magistrates, and Compensation Commissioners' Retirement System from 5% to 8% of earnings. The amendment assumes a savings of approximately $1 million in both FY 18 and FY 19.

Section 267 modifies laws affecting how affirmative action plans are developed, submitted, and implemented.  Specifically, the section allows agencies to submit affirmative action plans to the Commission on Human Rights and Opportunities (CHRO) by using either (1) a form prescribed by federal regulations (41 CFR 60-2) or (2) an existing affirmative action plan that has been approved by a federal agency. These changes would require additional staff for CHRO to review federal plans and provide technical assistance to agencies.  CHRO would need three positions at a cost of approximately $116,940 in FY 18 (partial year), and $179,537 in FY 19 (annualized), plus fringe benefits. 

Sections 268 – 279  (1) establish the Office of the Executive Administrator of the Crumbling Foundation (OEACF), (2) require a training program for contractors, (3) establish and administers a Collapsing Foundations Interest Rate Reduction Account and Program, (4) establish a state income tax exemption for financial assistance, (5) establish a state income tax deduction for contributions made to the Crumbling Foundations Voluntary Assistance Fund (CFVAF), (6) require that town building officials waive permit fees and State Building Inspectors waive educational fees for repairs to buildings with crumbling foundations, and makes various other changes.  This amendment has various fiscal impacts outlined below.

Within the Office of the Governor, the amendment establishes OEACF which is responsible for program eligibility requirements and providing grants to home owners that have deteriorated foundations. All expenses for this office are paid out through the Crumbling Foundations Assistance Fund (CFAF), including employee wages and benefits. The Governor's Office will need three additional staff at a cost of approximately $220,979 in FY 18 (partial year) and $360,472 in FY 19 (annualized). Further, the amendment requires the OEACF to contract for the development of a training program for contractors engaged in working on crumbling foundations. This is anticipated to have a cost of approximately $25,000 in FY 18.

The amendment establishes a Collapsing Foundations Interest Rate Reduction Account to provide interest rate subsidies for the program. Although the amendment does not specifically appropriate any funds for the program, it should be noted that the budget appropriates $2.7 million in both FY 18 and FY 19 to address crumbling foundations. This, in turn, requires the Department of Consumer Protection (DCP) to establish and administer a Collapsing Foundations Interest Rate Reduction program which is anticipated to result in a cost of approximately $100,000 annually. It is anticipated that DCP would require a third party consultant to develop the parameters and administer the program, as similar consumer programs currently run by the Department of Housing are administered as such.

The amendment establishes a state income tax exemption for those who received financial assistant from the Crumbling Foundation Program (CFP). To the extent such assistance is received by state income tax filers this results in a General Fund revenue loss as early as FY 18. The amendment also establishes a deduction against the state income tax for contributions made to the CFVAF. To the extent that such contributions are made by state income tax filers, this results in a General Fund revenue loss as early as FY 18.

Under the amendment, town building officials are required to waive permit application fees for repairs to buildings with crumbling foundations which would result in a revenue loss to municipalities. Furthermore, the amendment requires State Building Inspectors to waive educational fees on repairs to buildings with crumbling foundations which would result in a revenue loss to the General Fund

To the extent that programs exist to provide assistance to homeowners with crumbling foundations, there is an avoidance of a grand list reduction to municipalities resulting from the amendment. In the absence of any assistance, homes with crumbling foundations would lose assessment value, and therefore reduce the amount of taxable property within a given municipality.

Section 280 requires legislative committees, under certain circumstances, to hold a public hearing on Auditors of Public Accounts' audit reports. This will not result in a fiscal impact.

Section 281 requires that any raises given to judges and workers' compensation commissioners to date in FY 18 be returned and results in one-time savings of approximately $370,000 in FY 18.

Sections 282 – 284 establish the Passport to the State Parks and Forest account. It reduces DEEP General Fund appropriations by $12.7 million and transfers this amount to a separate, nonlapsing account of the General Fund for personal service expenses related to state parks and forests. It requires the Department of Motor Vehicles (DMV) to collect a supplemental fee of $10 biennially, on certain registrations for this purpose. Additionally, there is a General Fund revenue loss of approximately $7.3 million associated with residents no longer remitting fees at state parks.

Sections 285 - 309 result in an annualized cost of up to $276,000 for the Office of Policy and Management to staff the Municipal Accountability Review Board ($200,000 for salaries and $76,000 for fringe benefits). It is anticipated that staff will be needed to review and approve the budgets, bond ordinances, and collective bargaining agreements of the most financially distressed municipalities, and carry out several other duties as required by the amendment. The amendment results in a potentially significant savings to some municipalities. For example, it allows the most financially distressed municipalities to request that the Municipal Accountability Review Board approve or disapprove their budgets and bond ordinances. If the Board approved a budget that significantly reduced spending, such municipalities would correspondingly achieve significant savings.

Section 310 makes changes to the municipal collective bargaining process. To the extent that such changes alter the outcome of collective bargaining agreements, there could be a cost or savings to municipalities that would vary based on the provisions of such agreements.

Section 311 establishes a task force to study tax expenditures by municipal governments. This has no fiscal impact.

Section 312 re-establishes the Department of Environmental Protection (DEP) and the Public Utilities Regulatory Authority (PURA) as separate agencies. This shifts ratepayer appropriations of approximately $22.8 million in both FY 18 and FY 19 from the Department of Energy and Environmental Protection to PURA in the Consumer Counsel and Public Utilities Control (CC & PUC) fund to reflect implementation of the budget.

Section 313 allows the state to modify the terms of a contract if it serves a legitimate public purpose and the contract is impaired substantially.  The fiscal impact is indeterminate as the contract could result in a lower cost due to renegotiating the terms.

Sections 314 - 316 outline factors that an arbitrator should consider in arriving at a decision.  There is a potentially significant savings as awards are often substantial and the arbitrator must consider the financial capability of the state and its' ability to pay.

Section 317 eliminates retirement COLAs and the inclusion of overtime from the retirement benefit formula from collective bargaining, including arbitrated awards after July 1, 2027.  The fiscal impact to the state is reflected in section's 158 and 159 which make modifications for the retirement formula for employees of the State Employees' Retirement System as of July 1, 2027.  In addition, this section limits contract terms to four years which does not result in a fiscal impact. 

Sections 318 – 320 (1) increase employee contributions to the State Employee's Retirement System (SERS) to 7% for all employees effective July 1, 2027, (2) make various changes to the benefit formula for SERS members who retire after July 1, 2027, including eliminating a COLA until the fund reaches 80% funded and (3) eliminate overtime from the definition of salary for SERS benefit calculation after July 1, 2027. The amendment assumes savings of approximately $144 million in FY 18 and $177.8 million in FY 19. 

Section 321 establishes a Teachers' Retirement System Viability Commission and requires either OPM or OLM to pay, within available appropriations, for a global consulting firm to assist the Commission in implementing a plan to maintain the financial viability of the Teachers' Retirement System.  While the cost of such consultant is not known, in FY 17 the TRB paid its actuarial consulting firm approximately $100,000.

Section 322 requires the TRB to move from a biennial valuation to an annual valuation. This will result in additional costs in Other Expenses for actuarial consulting services. Over that past four years, annual actuarial consulting costs have ranged between $11,000 in FY 14 and $101,000 in FY 17.  

Section 323 requires the Office of Policy and Management or the Office of Legislative Management to contract with a consultant to develop a sustainability plan for the state. The cost of the consultant would vary based on the scope of the project. The amendment does not appropriate any funding for this purpose.

Section 324 limits bond allocations made by the State Bond Commission to two billion dollars per fiscal year beginning in FY 18. There is the potential for decreased General Fund debt service, to the extent that less bond spending occurs because of the cap on allocations than would have occurred otherwise. Potential savings are not expected to accrue until after the biennium.

Section 325 requires the Comptroller to report on any labor management savings realized in a given fiscal year and requires the difference between what was assumed in a fiscal year compared to what is actually realized to be accounted for in the subsequent fiscal year.  The impact will depend on the difference identified for the period FY 18 to FY 27.   

Section 326 allows the state to retain use of the Litchfield County Courthouse, land and associated building, unless the heirs of the lease-holders produce sufficient documentation of their rights to the land, provided such documentation was affirmed in the last forty years. The parcel of land is assessed at approximately $1 million. This provision could preclude the loss of this asset to the state.

Sections 327 - 328 rename two bridges. There is a minimal fiscal impact to create new signage.

Section 329 see Spending Cap section above.

Sections 330 - 500 make the following adjustments to bond authorizations in the biennium:

To the extent that these authorized funds are allocated by the State Bond Commission and issued by the Treasurer, the is a potential increase in future debt service payments for the General Fund (GO bonds) and Special Transportation Fund (STO bonds).

Sections 519 – 942:

Section 943 has no fiscal impact.

Section 944 – 960 See Revenue Table.

Sections 961 - 963 (1) require the Department of Social Services (DSS) to establish one or more hospital supplemental payment pool(s) from which payments will be distributed in accordance with a methodology determined by DSS in consultation with the Connecticut Hospital Association, (2) require the total amount of the supplemental payments made to hospitals to reflect the total amount included in the state budget, (3) in general, require the supplemental payments to be made on a quarterly basis on or before the last day of the quarter, (4) allow the Commissioner of DSS discretion to provide a distressed hospital, as defined by the amendment, an advance on the entity's FY 18 supplemental payment in accordance with conditions set forth by the Commissioner, and (5) prohibit the Governor from reducing any allotment for the Hospital Supplemental Payment account in FY 18 and FY 19.  The budget assumes $598.4 million in FY 18 and $496.3 million in FY 19 in the Hospital Supplemental Payment account.  Lastly, section 743 eliminates reference to blended inpatient hospital rates which does not result in a fiscal impact in accordance with current practice. 

Sections 964 – 972 reflect the revenue schedule as adopted by the Finance, Revenue and Bonding committee.

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 compares the revenue estimates to the projected expenditures for FY 20 – FY 22 based on the FY 18 and FY 19 budget.

FY 20 – FY 22 Fund Balance (in millions)

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.