OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

EMERGENCY CERTIFICATION

HB-6652

AN ACT IMPLEMENTING THE REVENUE ITEMS IN THE BUDGET AND MAKING BUDGET ADJUSTMENTS, DEFICIENCY APPROPRIATIONS, CERTAIN REVISIONS TO BILLS OF THE CURRENT SESSION AND MISCELLANEOUS CHANGES TO THE GENERAL STATUTES.

OFA Fiscal Note

State Impact: See Below

Municipal Impact: See Below

Explanation

The bill:

1) includes revenue provisions that result in a net General Fund revenue gain* of $54. 7 million in FY 12 and $13. 8 million in FY 13;

2) makes changes to the appropriations contained in PA 11-6 (the biennial budget) by increasing General Fund appropriations by $357. 5 million in FY 12 and $170. 7 million in FY 13, reducing the Transportation Fund by $42 million in FY 12 and $56. 4 million in FY 13 and increasing the Consumer Counsel and Public Utility Control Fund by $299,573 in FY 12 and $291,932 in FY 13;

3) results in additional FY 11 General Fund appropriations of $329. 2 million and a transfer of $4 million within the Transportation Fund to reflect deficiency needs;

4) includes budget implementation provisions; and

5) makes technical changes and adds other provisions that do not result in a fiscal impact.

*Please note: when combined with the revenue gain under SB 1240, the Human Services and Public Health Implementer Bill, the net General Fund revenue gain is $75. 9 million in FY 12 and $31. 7 million in FY 13.

Budget Balance

The table below contains the total appropriations and revenue estimates for all appropriated funds for FY 12 and FY 13 (PA 11-6 as amended by the bill).

 

FY 12 ($ - millions)

 

Revenue Estimate

Net Revenue Adjustments in the Bill + SB 1240

Approp

Surplus/
(Deficit)

General

18,719. 6

75. 9

18,707. 7

87. 8

Transportation

1,305. 4

(42. 5)

1,261. 9

1. 0

Other Appropriated

171. 3

-

171. 2

0. 1

Total All Funds

20,196. 3

33. 4

20,140. 8

88. 9

 

FY 13 ($ - millions)

 

Revenue Estimate

Net Revenue Adjustments in the Bill + SB 1240

Approp.

Surplus/
(Deficit)

General

19,416. 6

31. 7

18,952. 5

495. 8

Transportation

1,336. 7

-

1,277. 8

58. 9

Other Appropriated

169. 8

-

169. 6

0. 2

Total All Funds

20,923. 1

31. 7

20,399. 9

554. 9

REVENUE PROVISIONS: Sections 1 - 66 and 169 – 175

The table below illustrates the revenue changes contained in this bill and SB 1240, which when combined yield the General Fund balances indicated.

Revenue Changes to the Budget Included in Budget Implementer Bills

 

FY 12 $

FY 13 $

HB 6652

 

 

Taxes

(12,625,000)

(10,925,000)

Federal Reimbursements

24,848,957

24,715,924

Reduced General Fund Transfer to Transportation Fund

42,500,000

-

Subtotal 

54,723,957

13,790,924

     

Health Provider Tax Revenue per SB 1240

21,200,000

17,900,000

 

 

 

Net Revenue Changes

75,923,957

31,690,924

A list of the various tax changes is provided below.

Tax Changes

Revenue Gain/(Loss) Relative to the Revenue Schedule Adopted by the FRB Committee to Support PA 11-06

Item

FY 12 $

FY 13 $

Digital Animation Credit 55% Ins. Tax Credit Cap

(8,000,000)

(8,000,000)

Film Tax Credit changes: 50% in-state equity

(4,000,000)

(2,000,000)

Cigar Tax Cap

(200,000)

(200,000)

Sales Tax: Consignment Exemption

(525,000)

(525,000)

Sales Tax: Billing for Services

300,000

-

Electric Gen. Tax Resource Recovery

-

-

Livery Tax: Nonemergency/Dial-a-Ride Exemption

-

-

Nonadmitted Insurers/Surplus Lines

-

-

Remote Sellers Tax Changes

-

-

Restore Exemption for Trash to Energy

(200,000)

(200,000)

Total

(12,625,000)

(10,925,000)


Sections 1 - 4
and 52 make several changes that implement PA 11-6 (the biennial budget)
.

Section 5 distributes regional performance incentive grants of $7. 2 million in FY 12 and $7. 4 million in FY 13.

Section 6 makes clarifying changes regarding water rate setting mechanisms and public hearing notifications, which do not have a fiscal impact.

Section 7 allows municipalities to establish a special taxing district to provide ferry service. This could result in: (a) a minimal cost (less than $1,000) to provide written notice of a meeting and hold the meeting to establish the district, and (b) a potential cost to conduct a referendum, if requested, ranging from $1,000 for small towns to over $50,000 for the largest cities.

Section 8 provides a method for determining the City of Bridgeport's annual contribution to a pension plan for policemen and firefighters. It specifies that the FY 12 contribution must be at least $7. 0 million. In subsequent years, the contribution would be determined in accordance with the actuarially-based methodology described in the section. The estimated FY 13 contribution would be approximately $10. 5 million. This amount is projected to grow by an average of approximately five percent annually, peaking in FY 2029 (at $23. 0 million) and falling thereafter. Without passage of this section, the City would make estimated contributions of $20. 0 million, $21. 9 million and $22. 2 million, in FY 12, FY 13 and FY 14 respectively. The contributions would then decline through FY 30 but remain of significant magnitude.

Sections 9, 17 - 19 and 23 implement the budget by eliminating the transfer to the New Haven Line Revitalization Account1 and adjusting the fare increase date to reflect revised delivery of railcars. The table below shows the anticipated revenue collections from the scheduled fare increases adjusted for the new implementation dates.

Estimated Revenue Collections from

the New Haven Line Fare Increase
($-millions)

Fiscal Year

Amount

FY 12

1. 0

FY 13

3. 4

FY 14

4. 9

FY 15

6. 3

FY 16

7. 8

FY 17

9. 3

FY 18

10. 9

Sections 10 - 16, 20 - 32 and 174 implement PA 11-6 (the biennial budget) by eliminating the Transportation Strategy Board and reducing the annual transfer to the Transportation Strategy Board Projects account by $300,000.

Sections 33 - 36 allow the Department of Insurance (DOI) and the Department of Revenue Services (DRS) to take actions necessary to carry out provisions of the federal Nonadmitted and Reinsurance Reform Act of 2010. Conformance with this federal statute will allow the state to continue to collect approximately $17. 5 million annually in insurance premiums taxes, comprised of $11. 3 million collected by DOI from surplus lines brokers and $6. 2 million collected by DRS from purchasers of insurance policies issued by unauthorized insurers.

Section 37 exempts any business entity that meets certain criteria from the limit on transfers of film tax credits assumed in PA 11-6 (the biennial budget). This is estimated to reduce the revenue gain assumed in PA 11-6 by $4. 0 million in FY 12 and $2. 0 million in FY 13.

Section 38 limits the tax imposed on cigars to the lesser of fifty percent of the wholesale price or fifty cents per cigar. This is anticipated to reduce the revenue gain assumed in PA 11-6 (the biennial budget) by up to $200,000 annually.

Section 39 validates any certificate of release of lien issued prior to May 4, 2011, for the estate of a decedent who died on or after January 1, 2011. This provision has no fiscal impact.

Section 40 restores the sales tax exemption for consignment services, which reduces the annual revenue gain assumed in PA 11-6 (the biennial budget) by approximately $525,000.

Section 41 clarifies that nonemergency transportation and dial-a-ride are not subject to the livery tax imposed by the budget. This provision has no fiscal impact.

Sections 42 - 43 make technical corrections to various revenue provisions, which have no fiscal impact.

Section 44 directs $50. 23 million in FY 12 and FY 13 to towns, boroughs and lesser taxing districts for the Manufacturing Transition Grants. It also clarifies how the Municipal Revenue Sharing grants of an estimated $43. 03 million in FY 12 and $48. 73 million in FY 13 are to be distributed.

Section 45 clarifies that resource recovery authorities are exempt from the electric generation tax imposed in PA 11-6 (the biennial budget). The clarification has no fiscal impact.

Sections 46 - 47 and 171 move forward the effective date of the provision in PA 11-6 (the biennial budget) that requires remote sellers to collect sales tax. This could result in a revenue gain of up to $500,000 in FY 11 provided that more remote sellers do not sever their ties with Connecticut-based affiliates. (Please note that more than one remote seller has already done so. )

Section 48 clarifies the manner by which certain enumerated insurance premium tax credits may be utilized, and raises from 30% to 55% the liability reduction cap on insurance premiums tax credits for the digital animation production tax credit. These adjustments are estimated to reduce the annual revenue gain assumed in PA 11-6 (the biennial budget) by $8 million beginning in FY 12.

Sections 49 - 50 and 173 eliminate the issuance of Economic Recovery Revenue Bonds (ERRBs), which will result in a General Fund revenue loss of $646. 6 million in FY 11. The ERRBs were authorized by PA 10-179 and backed by a portion of the revenue from charges currently imposed on electric company bills2. The revenue from the bonds is no longer needed to balance the FY 11 General Fund budget due to better than anticipated revenue collections.

It should be noted that the amendment precludes total General Fund savings of $734. 1 million between FY 12 and FY 16 associated with the retirement of $646. 6 million in Economic Recovery Note3 (ERN) principal. If the ERRBs had been issued there would have been an FY 11 General Fund surplus and current law requires that it be used first to retire ERNs. Since debt service for ERNs is paid from the General Fund, the early retirement of ERNs would have reduced the total General Fund cost for debt service over the remaining five year term of the ERNs (see table below).

General Fund Savings Associated with the Retirement of $646. 6 million in

Economic Recovery Notes (ERNs)

($-millions)

Maturity Schedule for ERNs issued in 2009

General Fund Cost after Retirement of ERNs

General Fund Savings

Fiscal Year

Interest

Principal

Total

Interest

Principal

Total

Total

FY 10

3. 2

0. 0

3. 2

3. 2

0. 0

3. 2

0. 0

FY 11

40. 6

0. 0

40. 6

40. 6

0. 0

40. 6

0. 0

FY 12

40. 6

167. 9

208. 4

21. 2

167. 9

189. 0

(19. 4)

FY 13

33. 9

174. 6

208. 4

14. 5

104. 6

119. 0

(89. 4)

FY 14

25. 7

182. 7

208. 4

0. 0

0. 0

0. 0

(208. 4)

FY 15

17. 1

191. 3

208. 4

0. 0

0. 0

0. 0

(208. 4)

FY 16

9. 0

199. 4

208. 4

0. 0

0. 0

0. 0

(208. 4)

Total

170. 1

915. 8

1,085. 9

79. 3

272. 4

351. 8

(734. 1)

Section 51 makes a technical change that eliminates the regulatory process requirement for bus and/or rail fare changes and instead codifies current practice in statute. The provision has no fiscal impact.

Section 53 expands the eligibility of some business and property tax incentives to businesses occupying facilities in designated areas that have been affected by aerospace or defense plant closures. To the extent that a business locates in a facility within such a designated area, this results in: 1) a potential revenue loss to the General Fund from the corporation business tax of approximately $85,000 per year, and 2) a potential net grand list reduction for municipalities in the designated areas related to the property tax exemption for real property and manufacturing machinery and equipment.

Additionally, certain municipalities could potentially be eligible for partial reimbursement under the Distressed Municipalities grant in the Office of Policy and Management, and may experience a revenue gain. This does not result in a fiscal impact to the state, but may result in a decreased grant to all other municipalities as the grant is reduced on a pro rata basis if the appropriation is insufficient to fully fund the grant.

Section 54 does not impact the approximately $3. 0 million annually that the state receives under reciprocal tax refund agreements with other states.

Sections 55 - 57 consist of technical and clarifying changes that do not result in any fiscal impact.

Section 58 addresses withholding liability with respect to certain aspects of business succession, which does not result in any fiscal impact.

Section 59 extends timelines for the Department of Revenue Services (DRS) to make certain deficiency assessments against employers in certain circumstances. To the extent that this allows DRS to levy deficiency assessments that would not otherwise occur, this results in a potential revenue gain.

Sections 60 - 61 result in a minimal revenue loss due to the exemption of certain handicapped equipment from the Sales Tax.

Sections 62 - 65 reduce and limit certain penalties related to electronic tax filing and cigarette violations; they also impose a fine for the use of dyed diesel fuel in a motor vehicle.

The reduction in penalties for cigarette and tax filing violations is anticipated to result in a revenue loss. The imposition of the fine for the use of dyed diesel fuel is anticipated to result in a revenue gain. Since there are relatively few violations under these statutes, any revenue impact is anticipated to be minimal.

Section 66 streamlines the treatment of nonresident contractors with regard to the Department of Revenue Services in certain circumstances, which does not result in any fiscal impact to the state or municipalities.

Section 169 applies the sales and use tax rate increases contained in PA 11-6 (the biennial budget) to sales of services that are billed to customers for a period that includes July 1, 2011, which extends the rate increase to services rendered in June 2011. This will result in a one-time revenue gain of approximately $300,000 in FY 12.

Section 170 decreases the revenue gain assumed in the budget by $200,000 annually by restoring the sales tax exemption on the purchase of services or tangible property used or consumed in operating trash to energy facilities.

Section 172 repeals the three percent cabaret tax imposed in PA 11-6 (the biennial budget), which precludes an aggregate municipal revenue gain of approximately $900,000 annually.

Section 174 repeals various statutory provisions without fiscal impact:

Section 175 implements PA 11-6 (the biennial budget) by repealing statutory provisions related to payment in lieu of taxes (PILOT) payments to municipalities for manufacturing machinery and equipment and commercial motor vehicles.

APPROPRIATIONS PROVISIONS: Sections 67 - 168

Certain sections, and their associated fiscal impact are described in further detail below. All other sections, not identified below, make technical changes or include other provisions that do not result in a fiscal impact.

Sections 67 - 69 reflect the changes made in the General Fund, Transportation Fund and the Consumer Counsel and Public Utility Fund to PA 11-6 (the biennial budget). The changes are indentified in the table below:

General Fund (GF) Appropriation Adjustments to PA 11-6

Agency

Summary of Changes

FY 12 $

FY 13 $

Adjustments to Appropriations

CPC/Public Def.

Maintain funding for separate Guardians Ad Litem in child protection cases

537,000

537,000

DCF

Create a Differential Response System within the Department of Children and Families

4,000,000

4,000,000

DDS

Reduce Worker's Compensation Account to reflect current requirements

(1,000,000)

(1,000,000)

DDS

Reduce funding in Other Expenses to reflect a decrease in natural gas usage at Southbury Training School

(201,317)

(201,524)

DOC

Reduce inmate medical services by projected FY 11 lapse

(2,500,000)

0

DOL

Adjust WIA appropriation to reflect 2011 allocation from federal DOL

(1,232,317)

(1,232,317)

DOL

Provide funding for staff to handle complaints and hearings related to legislation that prohibits the use of credit scores in certain hiring decisions

84,860

86,557

DPH

Provide funding for one database administrator in OHCA for the collection of outpatient surgery patient data

99,584

84,584

DPS

Provide funding for the electronic recording of custodial interrogations

50,000

50,000

DPS

Reduce Workers' Compensation to reflect current requirements

(900,000)

(900,000)

DSS

Provide funding for approximately 150 RAP certificates for clients of the Department of Children and Families

1,500,000

1,500,000

DSS

Provide funding to enable ConnPACE to remain open for individuals awaiting a Medicare eligibility determination

125,000

125,000

DSS

Provide funding for a pilot program for Temporary Family Assistance (TFA) recipients who participate in the Jobs First Employment Services Program (JFES)

150,000

150,000

DSS

Provide funding for a fair rent adjustment to ICF/MR's that have already received certificate of need approval

150,000

150,000

DSS

Provide funding to prevent the administration of medications by certain unlicensed individuals

1,840,000

4,180,000

DSS

Adjust reduction to Medicaid emergency transportation administrative contracts and service rates

1,300,000

1,300,000

DSS

Provide funding to allow certain Medicaid clients to obtain a new pair of glasses, within the two year rule, if medically necessary

85,000

95,000

DSS

Adjust funding to reflect the revised structure and distribution of proceeds of the hospital tax

39,462,914

36,086,847

DSS

Medicaid Nursing Home User Fee Adjustment

6,800,000

7,600,000

Fringe

Fringe benefits associated with DOL staff

20,392

21,822

Fringe

Fringe benefits associated with database administrator within OHCA

19,146

20,446

JUD

Provide funding for parents with child support obligations

225,000

112,500

LG

Provide funding for the Director of Health Care Reform

169,000

162,000

MHA

Reduce Workers' Compensation account by projected FY 11 lapse

(1,750,000)

(1,750,000)

OSC

Adjust retiree health care funding to reflect current requirements

(32,238,512)

(34,235,758)

OSC - Fringe

Provide funding for extended unemployment compensation look-back

700,000

0

OSC - Fringe

Provide funding for the elimination of co-pays for colonoscopies

176,500

176,500

OTT

Reduce the UConn General Obligation (GO) debt service account

(10,000,000)

0

OTT / debt service

Increase the regular General Obligation (GO) debt service account

10,000,000

0

UHC

Reduce state block grant to the University of Connecticut Health Center

(2,000,000)

0

Lapse

Legislative Lapse Adjustment

0

(328,105)

Lapse

Judicial Lapse Adjustment

0

(1,855,672)

Subtotal Appropriation Adjustments

$15,672,250

$14,934,880

Transfers

JUD

Undo the transfer of DCF's parole unit and associated services from DCF to JUD

(21,204,545)

(21,106,493)

DCF

Undo the transfer of DCF's parole unit and associated services from DCF to JUD

21,204,545

21,106,493

REG

Transfer various accounts from Office of Financial and Academic Affairs for Higher Education (OHE) to the Board of Regents

1,739,319

1,644,968

OHE

Transfer various accounts from Office of Financial and Academic Affairs for Higher Education (OHE) to the Board of Regents

(1,739,319)

(1,644,968)

SDE

Transfer $712,500 from CommPACT Schools account in Office of Financial and Academic Affairs for Higher Education (OHE) to SDE

712,500

712,500

OHE

Transfer $712,500 from CommPACT Schools account in Office of Financial and Academic Affairs for Higher Education (OHE) to SDE

(712,500)

(712,500)

DECD

Transfer $119,000 in the Nanotechnology Study account and $95,625 in the SBIR Matching Grants account from DOL to DECD

214,625

214,625

DOL

Transfer $119,000 in the Nanotechnology Study account and $95,625 in the SBIR Matching Grants account from DOL to DECD

(214,625)

(214,625)

DEP

Transfer CEQ to DEEP instead of OGA

171,427

167,275

OGA

Transfer CEQ to DEEP instead of OGA

(171,427)

(167,275)

JUD

Transfer $50,000 from OE to JJPOCC

0

0

BOA / SOTS

Create a separate account within the SOTS for the BOA of $350,000

0

0

CEQ

Undo Transfer of CEQ to DEEP

171,427

167,275

DEP

Undo Transfer of CEQ to DEEP

(171,427)

(167,275)

Subtotal Transfers

$0

$0

Labor Management Savings Lapse Adjustments (SEBAC Agreement)

 

Original Labor Management Savings Lapse

(1,000,000,000)

(1,000,000,000)

 

Revised Labor Management Savings Lapse - Legislative

(4,586,734)

(6,671,872)

 

Revised Labor Management Savings Lapse - Executive

(625,947,354)

(806,963,225)

 

Revised Labor Management Savings Lapse - Judicial

(27,670,929)

(30,622,622)

Subtotal Labor Management Lapse Adjustments

341,794,983

155,742,281

Total GF Appropriation Adjustments

$357,467,233

$170,677,161

Special Transportation Fund (STF)

Appropriation Adjustments to PA 11-6

Agency

Summary of Changes

FY 12 $

FY 13 $

Adjustments to Appropriations

DOT

Restore funding for Non-ADA Dial-a-Ride program

576,361

576,361

Subtotal Appropriation Adjustments

$576,361

$576,361

Labor Management Savings Lapse Adjustments (SEBAC Agreement)

 

Original Labor Management Savings Lapse

0

0

 

Revised Labor Management Savings Lapse

(42,536,383)

(56,949,138)

Subtotal Labor Management Lapse Adjustments

($42,536,383)

($56,949,138)

Total STF Appropriation Adjustments

($41,960,022)

($56,372,777)

Consumer Council and Public Utility Control Fund
Appropriation Adjustments to PA 11-6

Agency

Summary of Changes

FY 12 $

FY 13 $

Adjustments to Appropriations

DEP

Undo Transfer of OCC to DEP

(2,734,140)

(2,697,202)

OCC

Undo Transfer of OCC to DEP

2,734,140

2,697,202

OCC

Undo Savings associated with OCC transfer to DEP

299,573

291,932

Total PF Appropriation Adjustments

$299,573

$291,932

Spending Cap

The deficiency appropriations contained in sections 70 - 73 result in the budget being under the spending cap by $4. 9 million in FY 11. The appropriations changes contained in Sections 67 - 69 result in the budget being under the spending cap by $1 million in FY 12 and $278. 4 million in FY 13.

Growth Rate

The growth rate for all appropriated funds is 4. 46% over FY 11 estimated expenditures in FY 12 and 1. 29% in FY 13. See the table below for details.

Growth Rates of Appropriations ($ in millions)

 

FY 11 Est. Exp *

FY 12 Approp

FY 12 Change

FY 13 Approp

FY 13 Change

 

$

$

$

%

$

$

%

General Fund

17,940. 3

18,707. 7

767. 4

4. 28%

18,952. 5

244. 8

1. 31%

Transportation Fund

1,178. 2

1,261. 9

83. 7

7. 11%

1,277. 8

15. 9

1. 26%

Other Approp. Funds

162. 8

171. 2

8. 4

5. 14%

169. 6

-1. 5

-0. 89%

 

19,281. 3

20,140. 8

859. 5

4. 46%

20,399. 9

259. 1

1. 29%

* The General Fund estimate is per OFA's Monthly General Fund Projection (May 25, 2011); Transportation and Other Fund estimates are per OFA's November 2010 Statement.

Sections 70 - 73 result in additional FY 11 General Fund appropriations of $329. 2 million and a transfer of $4 million within the Transportation Fund appropriations which results in no net increase. The increase in appropriations to the General Fund of $355. 2 million is offset by a reduction of $26 million. The following table shows the changes in agency appropriations contained in the bill.

Changes in FY 11 Appropriations

Amount $

General Fund - Increase Appropriations

 

Office of the State Comptroller

625,000

Department of Public Works

6,770,000

Department of Agriculture

180,000

Department of Public Safety

9,000,000

Department of Mental Health & Addiction Services

57,250,000

Department of Social Services

277,000,000

Teachers' Retirement Board

70,000

Public Defender Services Commission

1,600,000

Child Protection Commission

2,400,000

Workers' Compensation Claims - DAS

300,000

Subtotal - GF

355,195,000

General Fund - Reduce Appropriations

 

Reserve for Salary Adjustments

(26,000,000)

Total GF

329,195,000

   

Special Transportation Fund - Increase Appropriations

 

Department of Transportation

4,000,000

Special Transportation Fund - Reduce Appropriations

 

Debt Service - State Treasurer

(4,000,000)

Total - TF

-

The significant impacts identified in these sections are described below:

Department of Social Services (Medicaid) - The Medicaid shortfall is primarily due to continued caseload increases as well as adopted savings assumptions that have not been achieved. Over the past year, the HUSKY A program has seen caseload growth of 24,395 (a 6. 6% increase). The new Medicaid Low Income Adults (MLIA) category, formerly State Administered General Assistance clients, has seen enrollment grow from 44,752 in April 2010, when the program was converted, to 68,068 in April 2011 (an increase of 52. 1%).

The FY 11 Medicaid budget also had significant savings assumed for converting the HUSKY A program to an administrative services organization model ($76. 7 million) and for managing the care of the fee-for-service Aged, Blind and Disabled population ($60 million). As it does not appear that the department will implement these policies prior to the end of the fiscal year, it is unlikely that these savings will be achieved. The deficiency also includes an additional two-week payment to nursing homes in FY 11 (Section 156 of the bill repeals the two week delay). The original FY 11 budget included only 50 weeks worth of payments.

Department of Mental Health and Addiction Services (GA Managed Care) - The shortfall in General Assistance Managed Care ($57. 3 million) is due to higher than budgeted caseload and utilization for the Medicaid Low-Income Adult (MLIA) population and the transition of fiscal responsibility for additional services from the Department of Social Services (see DSS above for further explanation).

Department of Public Safety (Other Expenses & Fleet Purchases) - The shortfall in Other Expenses (OE) is due to the inability to achieve a reduced appropriation and maintain holdback savings. In FY 10, DPS expended $26. 9 million in OE; in FY 11, $22. 3 million is available net of the holdback. This represents a 17% decrease from the FY 10 actual OE expenditure to the FY 11 available funds for OE.

The shortfall in Fleet Purchases results from a contract savings holdback that cannot be achieved. DPS leases vehicles from the Department of Administrative Services (DAS) through monthly payments over a 48-month period. In FY 10, DPS expended $6. 6 million in the Fleet Purchase account; in FY 11, $3. 6 million is available net the holdback. As of February $3. 4 million of the $3. 6 million available has been expended in this account.

Department of Public Works (Other Expenses and Rents & Moving) - The Other Expenses deficiency is mainly the result of: (1) payment of an unanticipated contractor's claim, and (2) higher-than-anticipated operating and utility costs at state-owned buildings in Hartford. The Rents and Moving deficiency is due to a $2. 9 million holdback. The agency is unlikely to achieve significant savings in this account because it primarily funds fixed costs such as lease payments.

Reserve for Salary Adjustments - The available funding in the Reserve for Salary Adjustments account is due to non-bargaining unit salary increases which were not implemented in FY 10 and FY 11.

Section 74 makes procedural changes concerning the Governor's recommended appropriations for Judicial Branch agencies, which will not result in a fiscal impact. Specifically, it clarifies that the appropriations recommended for the judicial branch, which includes the Judicial Department and Public Defender Services Commission, shall be the department's estimates submitted to the Office of Policy and Management as part of their budget request package. This and the other provisions in this section conform to current law.

Section 79 makes a clarifying correction to the provisions of PA 11-6 concerning the hospital tax to ensure the continued receipt of federal revenue.

Section 87 makes a technical, clarifying change to the DDS cost settlement language so it conforms to current contracts.

Section 100 transfers funding of $150,000 in FY 12 and FY 13 from the Probate Court Administration Fund (PCAF) surplus to the Judicial Department, which will be used for a grant to the Ralphola Taylor Community Center YMCA in Bridgeport. This section also makes a clarifying change regarding funding for the Child Advocates of Connecticut, Inc. , and does not result in a fiscal impact.

Section 119 makes a technical change to conform with federal law, which enables the state to obtain additional federal revenue for Medicaid fraud recoveries.

Sections 121 - 124 clarify that utilization reductions are not a factor in determining cost neutrality in the Department of Social Services' (DSS) conversion of its medical programs to an administrative service organization (ASO) model. This language ensures that DSS will be able to meet the ASO conversion savings assumptions assumed in PA 11-6 (as amended by Section 67).

Sections 125 and 126 reduce DSS Medicaid emergency transportation rates by 10%. This will result in an annual savings of approximately $2. 2 million, which is assumed in the appropriation adjustments in Section 67.

Section 127 adds patient centered medical homes as a potential contractor for the Medicaid therapy management program.

Sections 128 - 130 allow the Commissioner of Construction Services to waive any audit deficiencies found during an audit if the Commissioner determines that it is in the best interest of the state to do so. This could result in a significant revenue loss to SDE and a significant savings to municipalities who would have otherwise had to refund the state for various school construction audit adjustments. In FY 08 the Office of the Internal Auditor within the State Department of Education recouped $11. 65 million in audit related adjustments corresponding to various school construction projects. SDE recouped $12 million in FY 09 and $16. 7 million in FY 10.

Section 138 reflects provisions related to the takeover of the Windham school district. Section 58 of PA 11-6 (the biennial budget) authorizes $1 million in carry forward funding from FY 11 into FY 12, and PA 11-6 (as amended by this bill) include $1 million under SDE's budget in FY 13 to support the takeover of the Windham school district.

Sections 146 - 151 make various changes to retirement eligibility and benefits for the Judges, Family Support Magistrates and Compensation Commissioners Retirement System. In general, changes are effective for retirements after September 1, 2011. This includes an increase in retirement age; adjusts the early retirement reduction factor; redefines the salary used for benefits calculation (last five years instead of final year); and places a cap on the maximum salary used for benefit calculation; and reduces the maximum cost of living allowance.

These changes are anticipated to result in annualized savings in the state's contribution as well as reduced liabilities to the Judges Retirement System upon recognition by the next actuarial valuation currently scheduled for June 30, 2012. Savings in FY 12 and FY 13 would occur only to the extent that the next valuation is completed earlier than scheduled. Please note these changes and their associated fiscal impact are contingent on the passage of the agreement between the state and State Employees Bargaining Agent Coalition (SEBAC), signed by both parties on May 27, 2011.

Section 155 specifies that an extension of Temporary Family Assistance (TFA) benefits, for certain participants in the Jobs First Employment Services pilot program, be limited to six months and be accomplished within available appropriations. This provision contains the cost of the pilot to the funding provided in Section 67.

Section 156 repeals the Medicaid nursing home two week rate payment delay provision identified in the deficiency write-up for DSS in Section 70.

Section 157 implements the budget by removing references to the Willington Rest Areas from statute to conform with their closing, effective July 1, 2011.

Section 161 reduces the transfer from the General Fund to Special Transportation Fund by $42. 5 million in FY 12, resulting in a revenue increase to the General Fund and a corresponding revenue loss to the Transportation Fund.

Section 165 includes provisions related to the agreement between the state and the State Employees Bargaining Agent Coalition (SEBAC). The bill assumes a savings lapse of $700. 7 million in FY 12 and $901. 2 million in FY 13 as a result of the provisions in the agreement. The budgeted savings are attributable to various provisions which impact wages, longevity, retirement, health benefits, technology and other savings initiatives. In general the provisions apply to unionized employees and non-unionized employees, individuals hired after 7/1/11 and individuals who retire after 9/2/11.

The savings assumed in the budget are predicated on the following items identified in the table below.

Savings Attributed to the SEBAC Agreement

 

FY 12 $

FY 13 $

General Fund

 

 

Wage and Longevity Savings

(136,125,403)

(288,179,212)

Increased Retirement Savings

(60,428,115)

(60,428,115)

Technology Savings

(35,263,048)

(44,078,811)

SEBAC Initiatives Savings

(85,635,107)

(85,635,107)

Healthcare Savings

(208,195,492)

(221,238,010)

Employee Retirement Contribution Savings

(121,807,852)

(133,508,464)

Higher Ed Alternate Retirement Savings

(10,750,000)

(11,190,000)

General Fund Savings

(658,205,017)

(844,257,719)

 

 

 

Transportation Fund

 

 

Wage and Longevity Savings

(9,726,997)

(21,370,645)

Increased Retirement Savings

(4,571,885)

(4,571,885)

Technology Savings

(4,736,952)

(5,921,189)

SEBAC Initiatives Savings

(4,364,893)

(4,364,893)

Healthcare Savings

(5,785,508)

(6,087,990)

Employee Retirement Contribution Savings

(13,350,148)

(14,632,536)

Transportation Fund Savings

(42,536,383)

(56,949,138)

General Fund & Transportation Fund Total

(700,741,400)

(901,206,857)

The bill also requires OPM to submit a plan, by June 30, 2011, to the Appropriations Committee detailing how the terms of the agreement will apply to non-represented classified and unclassified employees, except that the Joint Committee on Legislative Management and the Chief Court Administrator will submit such plan for the wage related provisions for the employees of their respective branches of government. In addition, each respective branch of government shall implement changes to longevity payments for their non-represented employees comparable to the longevity provisions of the agreement by August 1, 2011.

Section 167 repeals Section 1, 2 and 8 of PA 11-6 (the biennial budget), the General Fund, Transportation Fund and Consumer Counsel and Public Utility Control Fund appropriations of the biennial budget. This is replaced in Sections 67, 68 and 69 of this bill. Section 167 also repeals Section 74 of PA 11-6 which is no longer needed due to the parole transfer from DCF to Judicial not occurring in Section 67 of the bill.

Section 168 repeals Section 20 of HB 6600, which requires the Legislative Program Review and Investigations Committee to study the current process for adopting agency regulations and report by February 1, 2012 on potential cost-saving modifications. There is no related fiscal impact.

All other Sections make technical changes or include other provisions that do not result in a fiscal impact.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation except where there is no fiscal impact or in Sections 70 - 73 (the FY 11 deficiency appropriations) where there is no direct impact in the out years from the FY 11 increased appropriations. The revenue impact of Section 48 is limited to FY 12 and FY 13 due to sun-setting provisions included in PA 11-6 (the biennial budget).

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 This separate non-lapsing restricted capital project account in the Special Transportation Fund was created in 2005 as part of the legislation providing funding for the New Haven Line revitalization project. The project encompasses the purchase of new rail cars for the New Haven Line, the new rail maintenance facility in New Haven, and related equipment acquisition.

2 The revenue stream to pay off the ERRBs would have come from: (1) the Competitive Transition Charges (CTA) on Connecticut Light and Power (CL&P) and United Illuminating (UI) rate payers and (2) the Energy Conservation and Load Management Fund.

3 In order to finance the FY 09 deficit, $947. 6 million in Economic Recovery Notes were issued with a term of seven years.