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With No New Budget, What Happens To The State's Finances On July 1?

Jun 16, 2017

Connecticut legislators have a June 30 deadline to craft and pass a budget, but Republican and Democratic leaders in the General Assembly have dug in their heels on a host of issues associated with the budget -- things like tolls, casinos, recreational marijuana, and the concession deal Governor Dannel Malloy worked out with state labor union leaders. 

One thing all sides can agree on is that a deal by the end of the month seems unlikely. So what happens on July 1 if there is no new budget?

The short answer is: Connecticut continues on under the previous year's budget.

It sounds pretty easy and simple, but reporter Keith Phaneuf, who covers the state budget for The Connecticut Mirror, said operating under the old budget will throw the state into further fiscal disarray.

"If you just look at our retirement benefit programs, and our debt service," Phaneuf said, "just that handful of line items in the budget, including Medicaid, those are going to go up after July 1 by about $1 billion whether we want them to or not. We are legally obligated to pay that."

Those are line items that could have been renegotiated in a new budget.

Meanwhile, services could get slashed.

Phanuef said the state will have to drop contracts it is not legally mandated to honor -- things like commitments to private contractors who provide social services for the state's poorest and most vulnerable citizens.

On the revenue side, it doesn't get any better after July 1.

"Governor Malloy is going to have revenue items, specifically the state income tax, that are going to produce much less. So you are getting squeezed at both ends," Phaneuf said.

If that all sounds pretty terrifying, Phaneuf said there is hope in a legislative procedure that federal lawmakers are all too familiar with. "We should probably talk about continuing resolutions," he said.

A continuing resolution is stop-gap, short-term legislation that appropriates state funds to specific programs, while the bigger budget picture continues to be negotiated.

"You still have certain debt costs that are surging," Phaneuf said. "You have a tax system that's no longer expected to produce the revenue than it was even a year ago, but at least you get to control and manage the chaos."

A continuing resolution may be a long shot. The stop gap measure would have to be crafted and approved by the state legislature, who can't find common ground on the biennium budget.

With just 15 days left in the current fiscal year, Republican and Democratic leaders have drawn lines in the sand, neither side signaling a willingness to compromise.

On Tuesday, budget talks with the governor ended abruptly after only 45 minutes. Senate Republican President Len Fasano told reporters outside the governor's office, "My gut reaction is we’re going to get past July 1 without a budget."

Malloy said his administration is preparing for the possibility of no budget in place before June 30.