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Hartford (WTNH) – Governor M. Jodi Rell announced Tuesday a comprehensive deficit mitigation plan intended to erase a shortfall of nearly $470 million in the state budget that took effect in September. The plan includes both spending cuts made under Governor Rell’s authority and cuts requiring legislative approval, further “fund sweeps” and - for the first time during this budget crisis - small cuts in municipal aid.

Governor Rell also announced that she intends to call the General Assembly into special session soon.

“It is deeply painful even to suggest these cuts - and yet they are unquestionably necessary,” Governor Rell said. “State government cannot afford, literally or figuratively, to allow this budget - which has only been in effect a few short months - to grow any further out of balance.”

Governor Rell continued by saying that although the national economic situation is showing the first faint hints of improvement, the state outlooks remains as challenging as it has been for the last year.

“Revenues are falling below even our already-lowered expectations. What is not immediately obvious - but is critical to the overall picture - is the significant savings we are achieving in state contracting and the sizable reductions in state spending that are already in place. Without these steps the budget picture would be even grimmer,” Governor Rell said.

She continued by saying that the legislature now must work to make the needed reductions in spending and that the decisions that lie before ‘us’ are certain to be difficult.

“They are certain to be unpopular. They are equally indispensable. But lawmakers should act. They should adopt the cuts I have recommended or approve their own cuts,” said Governor Rell. “They cannot continue to ignore this pressing responsibility. Allowing the current budget deficit to linger and grow larger is not acceptable. Also unacceptable is simply tinkering around the edges of state spending or using unattainable ’savings’ figures. Only real, lasting and achievable spending reductions will solve this crisis.”

Governor Rell’s plan is based on the latest deficit projection from her budget agency, the Office of Policy and Management (OPM). In its monthly letter to the state Comptroller, OPM on Friday estimated the current year budget deficit at $466.5 million.

The Comptroller has already certified that state tax revenues will not be within 1 percent of original projections, meaning that a planned 0.5 percentage-point reduction in the state sales tax will not take effect in January, so the Governor’s plan adjusts the deficit figure downward by $129.5 million. That leaves a deficit of about $337 million to be closed.

On November 5, the Governor announced $31.6 million in agency budget cuts, called rescissions. The plan unveiled today calls for a further $19.3 million in rescissions. In addition, the plan calls for $16.8 million in program cuts that the Governor can order on her own authority, including reductions in some Department of Social Services and Department of Developmental Services programs and delays in the implementation of others.

Governor Rell’s plan recommends $116.3 million in program reductions that will require legislative approval. These cuts range from reductions in Culture and Tourism funding grants to reductions in certain Medicaid provider rates. The plan also proposes to delay to state Fiscal Year 2011 the “raise the age” changes in juvenile justice procedures.

The deficit mitigation plan anticipates “lapses” - unspent allocations to state agencies - of $16.1 million over and above the levels in OPM’s November 20 letter to the Comptroller, as well as a gain of about $200,000 from the sale of surplus state cars by the Department of Administrative Services.

The plan also calls for intercepting $52.8 million from accounts such as the Citizens Election Fund, the Stem Cell Research Fund and the Tobacco and Health Trust Fund. These are funds that would normally be deposited by the spring of next year.

The plan calls for a reduction of 3 percent in state aid to municipalities, a savings to the state budget of $84 million. This is the first time during this budget crisis that the Governor has recommended any reduction in state funding for cities and towns.
“In many ways, this is the most difficult cut I must propose,” Governor Rell said. “I have labored to maintain this aid at the same level as the prior year. The simple fact, however, is that the pressure on the state budget is too great. We cannot spend what we do not have.”

To offset the effects of this cut, the Governor is forming a panel of lawmakers and six municipal leaders - mayors or first selectmen from two large cities, two mid-size communities and two rural towns - to make proposals for immediate mandate relief. Governor Rell has previously proposed steps such as a temporary suspension of binding arbitration and requiring a two-thirds vote of the Legislature before any further mandates are imposed.

The panel is to make its recommendations as soon as possible so the Legislature can take swift action to enact them into law and maximize the savings to cities and towns.

“Our neighboring states face even deeper holes and must make cuts that are even more painful than those that I propose today,” the Governor said. “If we act now - and act with discipline and vision - we can ensure that when this economy really does turn around, Connecticut will be poised to take full advantage of the job growth, economic development and technological breakthroughs that will follow. Our state has always benefited from its tremendous work ethic and from Yankee ingenuity. These are the strengths we must bring to bear now to resolve this economic crisis decisively.”