OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

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

HB-5557

AN ACT MAKING ADJUSTMENTS TO STATE EXPENDITURES FOR THE FISCAL YEAR ENDING JUNE 30, 2013.

AMENDMENT

LCO No.: 5240

OFA Fiscal Note

State Impact: See Below

Municipal Impact: See Below

Explanation

The amendment includes: 1) a decrease to the FY 13 original appropriation of $11.5 million, this results in a total of $20.4 billion in FY 13 (for ten appropriated funds) , 2) provisions to implement the budget, and 3) revised FY 13 revenue estimates. The table below provides an overview of the revised FY 13 budget.

FY 13 Fund Balance

Fund

Revised FY 13 Revenue $

Revised FY 13 Appropriations $

Balance $

General

18, 992, 000, 000

18, 931, 519, 782

60, 480, 218

Transportation

1, 300, 400, 000

1, 288, 185, 953

12, 214, 047

Other Appropriated

180, 311, 000

167, 767, 478

11, 543, 522

Sections 1 - 7 include appropriations totaling $20.4 billion in FY 13, a decrease of $11.5 million from the original FY 13. The table below summarizes the changes by fund.

Fund Summary

Original FY 13 Appropriation $

Revised FY 13 Appropriation $

Difference $

Gross Appropriations by Fund

General Fund

19, 918, 305, 927

19, 120, 298, 830

(798, 007, 097)

Special Transportation Fund

1, 345, 782, 066

1, 299, 990, 724

(45, 791, 342)

Banking Fund

26, 176, 878

25, 005, 784

(1, 171, 094)

Insurance Fund

26, 131, 750

28, 370, 478

2, 238, 728

Consumer Counsel and Public Utility Control Fund

25, 986, 745

25, 351, 390

(635, 355)

Workers' Compensation Fund

22, 037, 360

21, 065, 588

(971, 772)

Mashantucket Pequot and Mohegan Fund

61, 779, 907

61, 779, 907

-

Soldiers, Sailors and Marines' Fund

3, 051, 536

3, 039, 412

(12, 124)

Regional Market Operation Fund

932, 821

932, 821

-

Criminal Injuries Compensation Fund

3, 602, 121

3, 602, 121

-

Total Gross Appropriations

21, 433, 787, 111

20, 589, 437, 055

(844, 350, 056)

General Fund Lapses

General Other Expenses Reductions - Executive

(9, 066, 200)

(9, 066, 200)

-

General Other Expenses Reductions - Legislative

(374, 000)

(374, 000)

-

General Personal Services Reduction - Executive

(11, 538, 800)

(11, 538, 800)

-

General Personal Services Reduction - Legislative

(476, 000)

(476, 000)

-

Labor Management Savings - Executive

(806, 963, 225)

-

806, 963, 225

Labor Management Savings - Judicial

(30, 622, 622)

-

30, 622, 622

Labor Management Savings - Legislative

(6, 671, 872)

-

6, 671, 872

Unallocated Lapses

(91, 676, 192)

-

91, 676, 192

Unallocated Lapses - Judicial

(5, 400, 672)

(5, 400, 672)

-

Unallocated Lapses - Legislative

(3, 028, 105)

(3, 028, 105)

-

10% Salary Reduction for Legislators, Commissioners, Constitutional Officers, & Executive Directors

-

(1, 300, 000)

(1, 300, 000)

Additional Judicial Department Savings

-

(4, 800, 000)

(4, 800, 000)

Additional Legislative Savings

-

(2, 000, 000)

(2, 000, 000)

Contracted Savings - SEBAC Budget Savings Initiative

-

(90, 000, 000)

(90, 000, 000)

Contracted Savings - SEBAC Technology Initiative

-

(50, 000, 000)

(50, 000, 000)

Eliminate Longevity Non-Union Employees

-

(10, 795, 271)

(10, 795, 271)

General Fund Lapses Total

(965, 817, 688)

(188, 779, 048)

777, 038, 640

Special Transportation Fund Lapses

Estimated Unallocated Lapses

(11, 000, 000)

(11, 000, 000)

-

Eliminate Longevity Non-Union Employees

-

(804, 771)

(804, 771)

Labor-Management Savings

(56, 949, 138)

-

56, 949, 138

Special Transportation Fund Lapses Total

(67, 949, 138)

(11, 804, 771)

56, 144, 367

Banking Fund Lapses

Branch Savings Target - Judicial

(63, 729)

(63, 729)

-

Eliminate Longevity Non-Union Employees

-

(98, 726)

(98, 726)

Banking Fund Lapses Total

(63, 729)

(162, 455)

(98, 726)

Insurance Fund Lapses

Eliminate Longevity Non-Union Employees

-

(77, 710)

(77, 710)

Soldiers, Sailors and Marines' Fund Lapses

Eliminate Longevity Non-Union Employees

-

(7, 656)

(7, 656)

Workers' Compensation Fund Lapses

Eliminate Longevity Non-Union Employees

-

(49, 512)

(49, 512)

Consumer Counsel and Public Utility Control Fund Lapses

Eliminate Longevity Non-Union Employees

-

(82, 690)

(82, 690)

Net Appropriations by Fund

General Fund

18, 952, 488, 239

18, 931, 519, 782

(20, 968, 457)

Special Transportation Fund

1, 277, 832, 928

1, 288, 185, 953

10, 353, 025

Banking Fund

26, 113, 149

24, 843, 329

(1, 269, 820)

Insurance Fund

26, 131, 750

28, 292, 768

2, 161, 018

Consumer Counsel and Public Utility Control Fund

25, 986, 745

25, 268, 700

(718, 045)

Workers' Compensation Fund

22, 037, 360

21, 016, 076

(1, 021, 284)

Mashantucket Pequot and Mohegan Fund

61, 779, 907

61, 779, 907

-

Soldiers, Sailors and Marines' Fund

3, 051, 536

3, 031, 756

(19, 780)

Regional Market Operation Fund

932, 821

932, 821

-

Criminal Injuries Compensation Fund

3, 602, 121

3, 602, 121

-

TOTAL NET APPROPRIATIONS

20, 399, 956, 556

20, 388, 473, 213

(11, 483, 343)

Spending Cap

The amendment is under the spending cap by approximately $240.3 million, assuming any deficiency appropriations in FY 12 do not deviate from the originally budgeted total on an all-funds basis. This is $38.1 million closer to the cap than the original FY 13 budget, which is under the spending cap by $278.4 million.

Growth Rate

The growth rate for all appropriated funds is 1.0% over estimated FY 12 expenditures. See the table below for details.

Growth Rates of Appropriations under LCO 5240 (in millions)

Fund

Est. Exp. FY 12 $

Original Approp.

FY 13 $

Revised
FY 13 $

Change From

FY 12 Est. to Rev. FY 13 $

Change From Orig. FY 13 to Rev. FY 13 $

General

18, 782.5

18, 952.5

18, 931.5

149.0

0.8%

(21.0)

(0.1%)

Transportation

1, 230.5

1, 277.8

1, 288.2

57.7

4.7%

10.4

0.8%

Other Approp.

164.5

169.6

168.8

4.3

2.6%

(0.8)

(0.5%)

TOTAL

20, 177.5

20, 400.0

20, 388.5

211.0

1.0%

(11.5)

(0.1%)


Section 8
is not expected to result in a General Fund fiscal impact. It requires any state agency that oversees capital projects exceeding $50 million that receive any funding from state bond funds
, to develop: (1) a plan detailing estimated capital outlays, future annual operating expenses, and (2) estimates of additional state revenues generated by the project. It also requires that the agency contract with an outside entity for an independent project analysis that includes alternatives to the project.

Sections 9 - 11 result in no fiscal impact by 1) imposing new requirements on projects participating in “First Five Plus, ” and requiring the Commissioner of the Department of Economic and Community Development (DECD) to enforce the program's job commitments; and 2) requiring DECD to report on certain economic development projects on a monthly and annual basis. DECD currently tracks the information required to be reported by the bill.

Section 12 requires the Commissioner of Correction to solicit bids to privatize mental health care services and food service to prisoners. Total savings of $4.2 million is associated with privatizing food services. Savings of $9.5 million for Inmate Medical Services is associated with privatizing inmate care.

Section 13 requires a two-thirds majority vote by the General Assembly for any bill that creates or enlarges a state mandate to local governments. This provision may result in a savings to municipalities if bills with state mandates are not passed by two-thirds.

Section 14, which consolidates the legislative commissions, would result in a savings of approximately $1.1 million in FY 13. The consolidated commission would employ 14 staff members, including one Executive Director. The six commissions currently employ 24 staff members.

Section 15 eliminates non-unionized employee longevity payments. This would result in annual savings of approximately $11.9 million for all appropriated funds in FY 13 and FY 14. In addition, the amendment prohibits longevity payments to be included in future contracts negotiated with collective bargaining units. Assuming collective bargaining approval, this could result in additional savings as contracts are being negotiated in the future. Longevity payments to unionized employees are estimated to be approximately $16.8 million in FY 13.

Section 16 reduces the salary of members and officers of the General Assembly, constitutional officers, commissioners of state agencies, and executive directors of boards and commissions by 10% in FY 13. This would result in an estimated savings of $1.1 million in FY 13.

Sections 17 and 18 of the amendment eliminates the Citizens' Election Fund (CEF) and results in a transfer of $18.5 million to the General Fund, effective July 1, 2012. In addition, the amendment precludes the transfer of approximately $10.6 million, plus Consumer Price Index adjustments, annually from the Treasurer's unclaimed property account to the CEF, beginning in FY 13.

Section 19 allocates funding of up to $460, 000 in FY 13 in the Department of Social Services Housing/Homeless Services account to upgrade the Homeless Management Information System.

Section 20 requires that the $8.5 million appropriated to OPM in section 1 of the bill, for a private provide 1% Cost of Living Adjustment (COLA) increase, be transferred to the following departments that have contracts with private providers; Developmental Services, Mental Health and Addiction Services, Children and Families, Social Services, Public Health, Correction and the Judicial Department.

Section 21 distributes the four subgrants of the Priority School District Grant by the four programs. Funds totaling $120, 751, 581 is included in the State Department of Education's (SDE) budget in FY 13 under this bill for these programs.

Section 22 reduces Franklin's manufacturing transition grant by $395, 228 to reflect the actual payment the town should have received. Section 44 (b) of PA 11-61 had misapplied the total acquisition cost of a certain commercial motor vehicle in calculating the town's grant.

Section 23 requires the Comptroller to transfer any FY 13 General Fund surplus under $50 million to the GAAP deficit.

Section 24 eliminates the Department of Transportation's scheduled 4% fare increases on 1/1/13 for rail, bus and ADA transit. The Department of Transportation's budget in FY 13 under this amendment includes an increase to the: (1) Rail Subsidy account of $6, 753, 189, (2) Bus Subsidy account of $1, 487, 670 and (3) ADA Para-Transit Subsidy account of $59, 150 to reflect the elimination of the scheduled fare increases.

Section 25 clarifies the scope, timing and method by which budgetary information is transmitted between the Office of Policy and Management and the Office of Fiscal Analysis. There is no related fiscal impact.

Section 26 increases the per pupil grants for the Edison magnet school, located in Meriden. The bill increases the grant to $8, 180 for all students attending the school. This is anticipated to result in a cost of $2.2 million to the Magnet School Account, within SDE.

Section 27 creates the Social Services Fraud Prevention Unit in the Division of Criminal Justice and requires the Medicaid Fraud Unit and the Social Services Fraud Unit to achieve savings of $102.2 million.

Section 28 provides: 1) 26 positions and funding of $1, 820, 000 to the Social Services Fraud Prevention Unit, and 2) 12 positions and $840, 000 to the Medicaid Fraud Control unit account.

Sections 29 and 30 do not result in a fiscal impact. These sections require the Joint Labor Management Information Technology Committee and the Joint Labor Management Committee established under the Revised 2011 SEBAC Agreement to submit reports to the General Assembly by August 15, 2012.

Sections 31 - 34 restricts the Department of Transportation from entering into any new obligations related to the New Britain-Hartford bus way project, and only expend funds for the cost of liquidated damages. The amendment also requires the unexpended Special Tax Obligation (STO) bond funds and federal funds to be reallocated to other transportation projects.

The table below details the allocations and expenditures as of March 1, 2012 for the project:

Current Status of Funds Allocated for the

New Britain to Hartford Bus Way Project (in millions)

Funding Source

Allocation $

Expenditures as of 3/1/12 $

Funds Remaining $

Federal

454.9

77.8

377.1

State

112.2

18.8

93.4

TOTAL

567.1

96.6

470.5

As of March 1, 2012 a total of $93.4 million in STO bond funds have not been expended, which would be reallocated by the amendment for other transportation projects. Additionally, a total of $341.9 million of federal funds are restricted for the bus way project leaving $113 million in federal funds to be reallocated by the amendment for other transportation projects. The amendment would result in a loss of $341.9 million in federal funds that are restricted for the bus way project.

To date, five contracts have been awarded for the project totaling $192.3 million, and $77.8 million of federal funds has been expended. It is uncertain the cost of penalties and litigation to the state to break these contracts and if the state would be required to pay back the federal funds expended.

State Bond Funds and Federal Funds Earmarked for the

New Britain to Hartford Bus Way Project (in millions)

Funding Source

Allocation $

Restricted $

Funds to be Reallocated $

Federal

454.9

341.9

113.0

State

112.2

-

93.4

TOTAL

567.1

341.9

206.4

In addition, it is anticipated that by ceasing construction of the New Britain to Hartford bus way project, DOT will avoid costs associated with providing annual operating subsidies for the bus way. The subsidy is estimated to be $8.0 million beginning in FY 15 and increase by approximately 3.0% to 3.5% each year.

Section 35 limits eligibility for the Risk Reduction Earned Credit (RREC) program. Limiting the eligibility will cost the Department of Correction $10.3 million in FY 13.

Sec. 36 – 45 reverses the consolidation of the Office of State Ethics, the Freedom of Information Commission, and the State Elections Enforcement Commission, into the Office of Governmental Accountability and re-establishes them as independent agencies.

Section 46 results in a revenue loss of $141.1 million in FY 13 and $147.0 million in FY 14 by exempting clothing and footwear under $50 from the sales and use tax. There would also be a corresponding revenue loss of $2.3 million in FY 13 and $2.4 million in FY 14 to the municipal revenue share account as a result of lower sales tax collections.

Section 46 also results in a revenue loss of $17.2 million in FY 13 and $17.9 million in FY 14 by exempting various non-prescription drugs from the sales and use tax. There would also be a corresponding revenue loss of $280, 000 in FY 13 and $290, 000 in FY 14 to the municipal revenue share account as a result of lower sales tax collections.

Section 47 imposes a $3.00 per gallon cap on the wholesale price of diesel which will result in a FY 13 revenue loss of $3.3 million to the Special Transportation fund.

The following table details the current diesel rate, wholesale price per gallon and estimated number of gallons for FY 13.

FY 13 Diesel Fuel Revenue

Item

Current Law

Amendment

Difference

Diesel Tax Rate

$0.512

$0.50

$0.012

Average Wholesale Price Per Gallon

$3.177

$3.00

$0.177

Diesel Tax Revenue - Total

$142.3 million

$139.0 million

$3.3 million

The annualized ongoing fiscal impact identified above would continue into the future dependent on the wholesale price of diesel.

Sections 48 - 49 repeal the scheduled Petroleum Products Gross Earnings Tax (PGET) rate increase, from 7.0% to 8.1%, which would otherwise go into effect on July 1, 2013. This results in a revenue loss of approximately $55.0 million annually beginning in FY 14.

Section 50 establishes a separate non-lapsing account known as the "Underground Storage Tank (UST) Clean-Up Account" and specifies that $12.0 million annually shall be transferred to said account from Petroleum Products Gross Earnings Tax (PGET) receipts. This results in an annual revenue loss of up to $12.0 million to the General Fund, and a commensurate revenue gain to the UST Account.

Section 51 and 52 require OFA and OPM to annually develop and report a consensus estimate of state expenditures. If OFA and OPM cannot reach an agreement on expenditure estimates the Comptroller shall issue the consensus expenditure estimate. Section 44 also prescribes a course of action for the Governor and the General Assembly if the consensus expenditure estimate forecasts a deficit greater than 1% of the total of General Fund appropriations. These provisions have no fiscal impact.

Section 53 results in an annual cost of approximately $3.4 million to the Department of Social Services Medicaid program. The cost is the result of increasing the dispensing fee for independent pharmacies from $2 to $4 for each prescription prescribed to a Medicaid recipient.

Section 54 establishes the Privatization Planning Committee to develop a plan to privatize direct care services provided by certain agencies.

Section 55 establishes a task force to study and make recommendations to improve efficiencies and avoid duplication in the Department of Energy and Environmental Protection and the Department of Agriculture. This results in a cost of less than $1, 000 to agencies participating in the task force to reimburse legislators and agency staff for mileage expenses.

Sections 56-60 adopt revenue estimates for the 2013 fiscal year.  These estimates are the sum total of: 1) April 30, 2012 consensus estimates of current law revenues; and 2) revenue estimates of the various policy changes included in the amendment.

Section 61 repeals the Earned Income Tax Credit effective with the 2012 income year. This results in a revenue gain of $116.5 million in FY 13.

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.