Governor M. Jodi Rell today submitted written testimony before the Legislature’s Appropriations Committee in support of her two bills that would allow the state to safeguard and grow its budget reserve fund in times of surplus and expand gubernatorial authority in making budget rescissions. H.B. 5019, An Act Concerning the Budget Reserve Fund provides the state with a means to build up the Budget Reserve Fund (BRF), also known as the Rainy Day Fund (RDF). House Bill 5017: An Act Concerning the Governor’s Rescission Authority would incrementally increase a Governor’s rescission authority to address budget deficits.
The Governor said the dire economy and resulting steep budget deficit was made “somewhat less difficult” because of the state’s $1.4 billion budget reserve fund that had been accumulated in the years leading up to the recession.
“This was a record amount in that fund and was a credit to the willingness of the state’s leadership to set aside resources for a fiscal ‘rainy day,’” the Governor said. “Unfortunately what followed was a fiscal hurricane.”
Under the Governor’s proposal, if the state Comptroller projects a budget surplus for the current fiscal year and the BRF is less than 10 percent of the General Fund appropriations for the year, then at least half of the surplus must be deposited into the reserve fund within five days of the Comptroller’s estimate. Once the reserve fund reaches 10 percent of the General Fund, any surplus must be deposited into the State Employees Retirement Fund, which is currently underfunded by $9.3 billion, or to pay down debt.
The Governor’s bill to expand rescission authority would allow a Governor to make deeper adjustments to agency budgets when economic conditions worsen. The proposal would not give a governor unlimited power to slash budgets. Current rescission authority is limited to up to 3 percent of the total appropriation from any fund or 5 percent of any appropriation.
Governor Rell is proposing that a Governor’s rescission authority be increased incrementally:
* Up to 6 percent of the total appropriation from any fund or 10 percent of any appropriation when a deficit of 3 percent or more exists
* Up to 10 percent of the total appropriation from any fund or 15 percent of any appropriation when a deficit of 5 percent or more exists
The rescissions statute does not allow a Governor to cut aid to municipalities. In addition, as a practical matter, a Governor is constrained from cutting appropriations for entitlement programs or pension and health benefits for state employees and retirees – expenditures that comprise much of the budget.
“Writing and following a state budget is – and should remain – a balanced process, something that involves all three branches of government,” the Governor said. “But when the process – and the budget – are badly out of balance, as is certainly the case right now, someone must be able to restore that equilibrium. As Chief executive of our state, this responsibility should rest with the Governor.”
