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20 Hartford Business Journal • October 12, 2015 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Budget cuts shouldn't surprise lawmakers G ov. Dannel P. Malloy is sitting on a very lonely perch. He's got an outright hostile relationship with hospital executives. The business community is still acrimonious after another wave of tax increases. Republicans continue to call for a special session following Malloy's recent decision to cut $103 million from the current-year budget, including a $63 million reduction in hospital Medicaid funding. Even members of Malloy's own party, including Comptroller Kevin Lembo, are dis- satisfied with Malloy's choice to cut health care and other social-service funding this early into the budget year, which began July 1. Such is the life of a governor. Legislators, however, shouldn't be so quick to point a wagging finger of disapproval. It is state lawmakers, after all, particularly Democrats, who have passed countless budgets in recent years that have helped drive Connecticut into "a period of permanent fiscal crisis," as Malloy's budget chief Ben Barnes so eloquently put it last year, analyzing the state's financial condition. Even two major tax increases in 2011 and 2015, haven't been able to stop the state budget from bleeding red ink, indi- cating that Connecticut's current fiscal path is unsustainable. Yet, lawmakers have refused to make the tough choices to put the state on a more stable financial footing. Mid-year budget cuts, therefore, shouldn't come as a surprise to legislators, and neither should the fact that reductions largely came from health and social services, which make up a significant part of the budget. With so many fixed costs, including pension pay- ments and state-employee salaries and ben- efits, there is little discretionary spending to slash, leaving the most vulnerable residents susceptible to cuts. This is the harsh reality for a state that has been fiscally reckless for far too long. Malloy, of course, takes some of the blame for the state's fiscal crisis. He has signed multiple budgets that were doomed from the start, falling out of balance as quickly as they were signed into law. Now the state is facing another potential billion-dollar defi- cit once the current two-year budget expires. That likely means more cuts and/or tax increases are on the horizon. Those ominous clouds won't instill business confidence, likely stunting economic growth for the foreseeable future. One area that must be looked at is state employee wages and benefits. If Connecti- cut is truly going to adopt budgets it can afford, further concessions must be made by state workers and/or the state workforce must be downsized. Asking for union concessions, however, is very risky politically, especially for a democratic governor. But Malloy will not likely seek a third term in office, giving him more freedom to play hardball, even if it upsets his political base. Malloy is certainly no stranger to throwing sharp elbows. Just look at the war of words he has started with hospital executives, whom he has essentially accused of being overpaid. Malloy is a savvy politician who wants to leave behind a positive, lasting legacy. To do that, he must shape budgets that the state can afford without continually asking taxpayers to dole out more. So far he has failed to do that. n RULE OF LAW Policymakers ignore constitutional spending cap By John Horak T he biggest Connecticut business news event of 2015 is likely to be General Electric's decision about its future in Connecticut. As one would expect, GE is thoroughly investigating the business climate in the several states it is considering for its headquarters, to the point (reported in the Sept. 11 Wall Street Journal) of examining how the members of each state's federal Con- gressional delegation voted on national issues important to GE. Let's hope that GE's research team does not look too closely at the way our state-level law- makers voted when they adopted the recent Connecticut budget that triggered GE's disquietude about staying here. If they do, GE's depar- ture will be a forgone conclusion. Here is why: In the 2015 legislative session Connecticut's "budget cap" stood between the legislative majority and its desire to increase spending. To get around this obstacle, a bare majority (52 percent in the House and 51 per- cent in the Senate) voted to modify the defini- tion of the term "general-budget expenditures" as it appears in the cap (which sets the upper limit on spend- ing) to exclude pay- ments to the state's underfunded pension plans from the cap's limits. The majority did this despite the fact that in 1993 then Attorney General Richard Blumenthal issued a formal opin- ion concluding that this could not be done with less than a 60 percent vote in both the House and Senate. How could this happen? What does it mean? Let's take a quick look at the cap before address- ing these questions. The cap was put in place in 1991, and it has always befuddled legislators because it was written into law in two places: It was draft- ed into the statutes in 1991 (by the normal simple majority vote required for statutes), and into the state constitution in 1992 (which required the approval of the voters in a ref- erendum). While the two versions both use the term "general-budget expenditures," they are not fully synchronized as the following demonstrates. First, the constitutional cap is unusual in that it delegates back to the legislature (without the need for another voter referen- dum) the responsibility to draft the defini- tions of terms used in the constitutional text — including "general-budget expenditures" — but with the proviso that "[t]he enact- ment or amendment of such definitions shall require the vote of three-fifths (60 percent) of the members of each house of the General Assembly." The legislature has yet to fulfill its responsibility to define these constitutional terms, 24 years later. Second, the statutory version of the cap raises unusual issues because while statutes can ordinarily be enacted or amended by the vote of a simple majority (which is what it just did with the term general-budget expen- ditures), the constitutional cap's 60 percent voting requirement for amendments of these terms is a large legal elephant that suggests otherwise. This conundrum was presented to Attor- ney General Blumenthal in 1993, and he gave the elephant its due and concluded that the legislature could not amend the statu- tory terms with less than a 60 percent vote, because to conclude otherwise would render the constitutional cap meaningless. So, let's circle back to the two questions raised above: How could the legislature amend the statute with a majority vote? What does their doing so mean for Connecticut? The simple answer to the "how" question is that they cheated. The more complex answer, I suspect, is that the majority "took the posi- tion" (a legal term lawyers use when a client does something not clearly right but to which a defense is available if found out) that Blumen- thal was wrong in 1993. There is a slim basis for this position in that attorney general opinions are considered influential but not binding legal authority — which means that the courts could disagree with his 1993 conclusion if the lawful- ness of the budget were ever to be challenged in a lawsuit. What does this mean? The simple answer is that the legislature has disre- garded the will of the people who voted to approve the constitu- tional cap. The more com- plex answer is that it will give any com- pany doing business here (think GE) rea- son to wonder if the state legislature abides by the rule of law when it comes to managing state finances. Moreover, while it is relatively easy to pull the wool over the eyes of voters, the same is not true for the bond market or rating agen- cies, which may not appreciate the shell game being played with our massive unfunded pen- sion liabilities. The 2015 legislation in ques- tion reclassified liabilities to the pension plan as "indebtedness" (which the constitution excludes from the cap) seemingly without regard for other consequences — such as whether doing so caused the state to exceed its debt-limit statute. Article 11 of the Connecticut constitution requires members of the legislature to take an oath swearing they "will support the constitu- tion of the state of Connecticut … and faith- fully discharge, according to law, the duties of their office." Perhaps I missed something when researching this issue and what the legislators just did is consistent with their pledge to sup- port the constitution and act lawfully. As to that possibility I put them to their proof. n John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. The views expressed are his own. HARTFORDBUSINESS.COM POLL Should lawmakers ask state workers for salary and benefit concessions to help balance the budget? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Are hospital funding cuts the best way to deal with the state budget deficit? 4.8% Yes 95.2% No John Horak ▶ ▶ The simple answer is that the legislature has disregarded the will of the people who voted to approve the constitutional cap. ▶ ▶ Malloy, of course, takes some of the blame for the state's fiscal crisis. He has signed multiple budgets that were doomed from the start, falling out of balance as quickly as they were signed into law.