In discussions about the state budget, questions often arise about why emergency budget cuts – known as “rescissions” – often fall hardest on human service programs that support our State’s most vulnerable children and families. This question is timely, not only due to the recent second round of rescissions announced by the Governor, but also due to the upcoming budget discussions for fiscal year 2016 and 2017: discussions that will take place in the shadow of projected deficits of over a $1 billion for each of the two years.
At Connecticut Voices for Children, we work to give children the voice they lack at the ballot box — to elevate the needs of children and families to the number one priority in the budget. Unfortunately, there are mechanisms built into the budgeting process that put programs for children and families at particular risk when funds are scarce; however, because the budget process can be somewhat opaque, these reasons are not always well understood. To help Nutmeggers who want to keep kids a priority in the State budget engage in powerful and informed advocacy, this week we’re releasing a brief series on our blog – “Why Are Families Cut First” – that discusses the State’s short and longer-term budget challenges, why these challenges have led to cuts to programs for children already, and why they might put children at greater risk in the future.
Today, we focus on the short term – the Governor’s recent rescissions, and why these fall heaviest on human services.
The State is running a deficit in the current fiscal year — if it keeps spending money and collecting revenue at the current rate, then on June 30th it will have spent more than it collected. This is happening for two major reasons: a) we are collecting less in gas taxes than expected (largely because the price of gas has fallen dramatically) and b) Medicaid spending is likely to exceed expectations.
When the state runs a deficit, the Governor has the authority to make "rescissions" – to unilaterally impose cuts to the budget without the legislature's approval in order to close the deficit. However, not all parts of the budget are created equal:
- About three out of every 10 dollars spent from the State's "General Fund" (which is basically the whole budget, excluding transportation and a few other special expenses) are spent on salaries and benefits for employees. These payments are obligated under collectively bargained contracts with State employees, and the state must make them or face a lawsuit.
- Another one out of every 10 dollars is spent on debt service – regularly scheduled payments that we make to pay back money we have already borrowed. If we do not make these payments, we default on our debts.
- Another two out of every 10 dollars is spent on grants to towns, mostly for education, but also for other purposes. These grants cannot be cut using rescissions without legislative approval. Cutting municipal aid is also not very useful, because even if it closes the State's deficit, it could create a new deficit for many towns.
- Finally, just over one out of every 10 dollars is spent on the Medicaid health insurance program. Since for every dollar we spend on Medicaid, the Federal Government pays us back 50 cents to a dollar, cutting Medicaid is a very inefficient way to close the deficit, saving only 50 cents or less on each dollar of services lost to vulnerable families.
The important point is this: when the State runs a deficit, even though the Governor could theoretically cut any spending, in practice, only about 30% of the budget can quickly be cut without facing a lawsuit, breaking the law, or losing the State even more money.
So what's left to cut? The answer is, health and human services that the State pays for out of pocket, much of which goes to groups like maltreated children, children and families struggling with mental health challenges, and individuals with developmental disabilities. This is a major reason why human services are often on the chopping block when the State is running a deficit – there just is relatively little other spending that the State can cut legally and efficiently on short notice.
Tomorrow, we’ll take a look at the State’s long-term budget challenges, and examine how some of the same forces discussed here might jeopardize funding for kids.