STATE OF CONNECTICUT 2009, 2010, 2011 Budget Issues

1. STATE OF CONNECTICUT 2009, 2010, 2011 Budget Issues New Canaan, CT March 2009

2. Connecticut Has a Biennial Budget Governor Submits Budget to Legislature in Odd Numbered Years Appropriations Committee Holds Hearings for Each State Agency Subcommittees Review Budget Information Subcommittees Report to the Appropriations Chairmen Appropriations Chairmen Prepare Budget Recommendations Budget Report Submitted to Full Appropriations Committee and Voted Upon Finance Committee Produces Revenue Estimates and Capital Budget Bills Appropriations and Finance Bills Submitted to House and Senate Alternative Budgets May Be Presented by Minority Party Legislative Leaders and Governor Negotiate Budget House and Senate Debate and Adopt Governor’s Signature or Veto (Returned to Legislature) Legislature’s Budget Process (Governor Proposes, Legislature Decides) 1

3. History Legislature Passes Income Tax and Spending Limit/Cap in 1991 Voters Approve by 4 to 1 a Constitutional Amendment to Limit State Spending in 1992 – Yet to Be Implemented by 3/5 Vote of House and Senate Key Features of the Cap Calculated From Previous Year’s Base (Total Appropriated Funds) Growth=Base Year Multiplied by 5-Year Rolling Average Income Growth (or Prior Year’s Inflation Rate, Whichever is Greater) Excluded: Debt Payments, Grants to Distressed Municipalities and Federal Mandates and Court Orders (1st Year Only) Exceeding the Spending Cap Governor is Required to Issue a Declaration of Extraordinary Circumstances or Emergency Legislature along with the Governor Determines What Spending in Excess of the Cap Will Be Included or Excluded in the Base for Future Calculations Legislature Must Approve Additional Spending by a 3/5 Majority. (91 Votes in the House and 22 Votes in the Senate) The Spending Cap 2

4. FY 09 General Fund Revenue Special Transportation Fund Not Included - $1.04 billion Total = $16,537.3 million Other Taxes, $562.1 3.4% Other Revenue, Gambling, $665.2 4.0% $697.6 4.2% Cigarette Tax, $325.0 2.0% Income Tax, $6,674.0 40.4% Federal Grants, $3,141.3 19.0% Oil Companies Tax, $81.4 0.5% Corporate and Business Sales and Use Tax, Taxes, $1,010.7 6.1% $3,380.0 20.4% 3 Data Source: Office of Fiscal Analysis Data Source: Office of Fiscal Analysis

5. Major Budget Components for FY09 (In Millions) Legislative $76.0 0.4% Fringe Benefits $1,871.2 10.2% Other Misc. $239.4 1.3% (PILOT Grants, Workers’ Comp., Reserve for Salary Adjustment) General Govt. $607.8 3.3% Regulation & Protection $377.3 2.1% (DPS, Banking, Insurance, & others) Conservation & Development $108.7 0.6% (DEP, DECD, Tourism, & others) Health & Hospitals $1,686.5 9.2% (DPH, DDS, DMHAS, & others) Transportation $506.4 2.8% Debt Service $1,966.9 10.7% Judicial $553.1 3.0% Corrections $1,599.7 8.7% Education $3,809.8 20.8% ECS Grants $1,889.2 10.3% Higher Ed. $747.7 4.1% Human Services $4,950.4 27.0% Medicaid $3,763.8 20.1% SAGA $182.4 1.0% Temp. Assist. To Families $112.0 0.6% 4 Slide provided by the Office of Fiscal Analysis

6. FY 09 Tax Revenue Drop-Off$1.8 Billion Loss - $944 million current deficit 5 Data Source: OPM monthly letter to the State Comptroller

7. FY 2009 FY 2010 FY2011 FY 2012 Revenue 15,608 14,551 14,787 15,657 Expense 16,961 18,519 19,500 20,479 Deficit(1,353) (3,068) (4,713) (4,822) % of Budget 8% 21% 24% 24% General Fund Budget Projections FY 09 through FY 12As of February 2, 2009(in millions) 6

8. Spending Increases (In Millions) Data Source: Office of Fiscal Analysis U.S. Bureau of Labor Statistics 7

9. “The only obesity the state of CT has is the size of its government.” ~ Rep. Hertherington “State government does not need to tighten its belt. It needs to go on a permanent diet in order to sustain a longer life.” ~ Nick Perna CT Economist 8

10. State Aid to Municipalities (In Millions) 9

11. Town Comparison and Return on Revenue(Income Year 2007) 10

12. CT Income Tax Paid (2007 Income Year) Non-Fairfield County Fairfield County $2,860,778,549 $2,513,726,828 53.2% 46.8% 895,000 residents Grand Total Paid by 3.4 million State Residents = $5,374,505,377 Source: Connecticut Department Of Revenue Services 11

13. State revenues reflect previous 12 month economic activity 12

14. 13

15. Rainy Day Fund At Risk(dollars in millions) 14

16. Rainy Day Fund (Budget Reserve Fund) $1.4 Billion 2009201020112012 $350 $350 $350 $350 Rainy Day Fund At Risk (dollars in millions) 15

17. No Tax Increases No Spending Increases Next Year Maintain Current Funding to Towns Eliminate and Consolidate State Agencies and Commissions Cancel a Significant Amount of Pending State Bonding Seek Concessions from State Employee Unions Eliminate Many Existing and Vacant State Employee Positions Financial Incentives to Towns that Voluntarily Regionalize Services Require 2/3rds Vote to Impose New, Costly Mandates Delay In-School Suspension & “Raise-the-Age” Mandates Suspend Binding Arbitration for Towns for 2 Years 82% of CT Residents Agree: it is time to shrink the size of state government (Quinnipiac Poll 2/10/09) Governor Rell’s FY 2010-2011 $38.4 Billion Budget Proposal 16

18. Areas of the State Budget to Reduce Tax and Revenue Initiatives proposed in Finance Committee Potential Expansion of Local Revenue Sources Regionalization / Smart Growth Fees for DOT and Tolls Projected Deficit over the next 2 years. Other Topics of Concern Topics for Discussion 17

19. “The best prospects for our people are education, industriousness and self-reliance” ~ Booker T. Washington That is as true today as it was in 1901 18