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October 21, 2008

Governor Rell Announces Deficit Mitigation Plan

Governor M. Jodi Rell today announced her plan to eliminate Connecticut’s 2009 fiscal year budget shortfall with a combination of spending cuts, new revenue owed Connecticut by the federal government, a tax amnesty program, the cancellation of the start of new state programs and by continuing to bring efficiencies to state government. The plan requires no new taxes, no employee layoffs and it leaves the state’s $1.4 million budget reserve fund (Rainy Day Fund) intact. The Governor also announced that she is calling the legislature into session on November 24 to adopt her plan. 

“Connecticut government must live within its means,” Governor Rell said. “Spending cuts are never easy -- but we live in a time of great uncertainty. These difficult financial times demand that we reduce spending this year rather than increase taxes, for we know that raising taxes is the worst thing we could do for families and businesses in the middle of a recession.

“People wonder from day to day whether they will be able to hang on to their jobs,” the Governor said. “They have watched with anxiety and dread as their savings accounts, retirement accounts, college savings accounts and other investments have dwindled – even disappeared. They have watched neighbors lose their homes to the subprime mortgage crisis. They have seen their plans for retiring in the next year or two suddenly put on hold.

“It is time for government to tighten its belt and to reduce its spending, just as families are doing each and every day. If I have to choose between cutting a government program or forcing families to pay more in taxes, I will choose to cut government each and every time.

A cornerstone of Governor Rell’s plan to mitigate the projected deficit involves identifying revenue due to the state under current law. A settlement will result in additional federal revenue due from reimbursable costs incurred in the operation of the Department of Developmental Services. The Governor is also proposing a Tax Amnesty program that is expected to generate a minimum of $40 million.

In addition to new revenues, the Governor’s plan calls for expanding the abandoned property program to include unclaimed beverage container deposits.  The plan also calls for further spending cuts including: delaying several new initiatives; changes in the State’s Fleet Vehicle Procurement program; applying reductions to several programs which were funded by prior year surpluses (carry-forwards); returning funds in the Governor’s Contingency Fund; identifying areas where appropriations could lapse; and pushing all agencies to become more vigilant in identifying areas where further cutbacks can be achieved.

Earlier this year, Governor Rell took a number of steps to rein in state spending and to keep last year’s state budget “in the black.” State agencies were required to cut their gasoline use and ordered to cease all but the most essential spending. The Governor also ordered a hiring freeze and banned out-of-state travel paid for with state funds.

Those belt-tightening measures helped the State finish the budget year that ended June 30, 2008, with a surplus of $84 million.  The Governor proposed using the entire surplus for winter heating assistance and developed plans to provide heating assistance to low and middle income Connecticut families, senior citizens, nonprofit service providers and to help cities and towns with heating costs for school classrooms.

For the current 2009 fiscal year, the Governor has already ordered two rounds of  budget cuts – the first, a cut of $150 million and most recently, a cut of $34 million.

“Wherever possible, I tried to make sure that agencies with the greatest public safety or human services roles saw the smallest cuts” Governor Rell said. “Some agencies – such as the Department of Correction – saw no cuts at all. Other major areas of spending, such as aid to municipalities, cannot be cut.

“My plan to eliminate the remaining 2009 deficit does not require new taxes. It does not require tapping the Rainy Day Fund. It does not require layoffs of state employees,” the Governor said. “It does not impose new burdens on the hard-pressed taxpayers and businesses of our state, who continue to cope with the fallout of a national economic downturn. Government’s highest priority must be to safeguard its residents – and that includes the financial health and welfare of Connecticut families.

“The difficult economic conditions will not end with this year’s budget deficit. Bigger challenges – and with them, bigger changes – are coming. However, I believe we will not only master these challenges but use the opportunities for change to streamline government and make it more responsive to taxpayers.”

A summary of the Governor Rell’s Deficit Mitigation Plan is attached.

View the Plan Summary (PDF, 51KB)