Cap Crunch

Back • May 20, 2013 • Uncategorized

As budget negotiations enter the final weeks of the legislative session, a major obstacle remains: without a two-thirds majority of each chamber of the General Assembly agreeing to the Governor’s proposed spending cap changes, legislators will need to cut over a billion dollars from the proposed upcoming biennial budget due in large part to existing structural flaws in the current spending cap formula. To do so would be to miss a prime opportunity to address these structural flaws, and would slash critical resources from a state budget already stretched thin.

The Governor has proposed two substantive reforms to the cap rules. Here’s why they matter:

  • To help the state take advantage of fully-funded federal programs (like the expansion of Medicaid to low-income adults under Obamacare), the Governor proposes exempting new spending that is entirely reimbursed by the federal government from the spending cap. This will ensure that the spending cap fulfills its original purpose – to limit state, not federal, spending.  Under current cap rules, the state has an incentive to turn away new federal funds.
  • Additionally, the Governor proposes that contributions to pay down the state’s huge unfunded pension liabilities should be exempted from the cap.   Making these pension fund contributions is important to improving the state’s long-term fiscal health, and the Governor’s proposed reform would  help us fill the hole in the pension system without squeezing out other important investments in kids and families.

Failure to adopt these proposed changes would force more than a billion dollars in proposed cuts to critical investments in Connecticut’s future – while handcuffing the state’s ability to pay ahead on longstanding fiscal obligations, and creating a disincentive for the state to maximize important new federal revenue.

Lawmakers should act swiftly to approve the changes set forth in House Bill 6352.  For more information, see Voices’ recently-released fact sheet and see our new issue brief on the topic, which explores additional reforms that could improve spending cap rules.