A Few Modifications in the Spending Cap’s Calculations Could Create More Room Under the Cap and Improve Budget Accountability

NEW BRITAIN (February 21, 2007) - As currently structured, the state’s spending cap will be very tight in fiscal year 2008. Consequently, the cost of simply maintaining services at the current level would exceed the spending cap by an estimated $540 million to $800 million. As currently configured, the cap leaves the state little ability to fund new initiatives proposed by both the Rell Administration and state legislators, according to Connecticut Health Foundation (CT Health) research released Monday.

Researchers Alison Johnson, a Middletown-based state budget consultant, and Elizabeth McNichol, Senior Fellow at the Washington, D.C.-based Center on Budget and Policy Priorities, revisited the state’s spending cap to analyze the impact of the Governor’s fiscal year 2007-2008 budget.The foundation has commissioned spending cap research over the past 6 years to explore modifications that would not only provide more room under the cap, but also stay true to the original purpose of the cap, which is to control spending.

The most recent research shows that the growth allowed by the cap has little to do with the actual growth in the state’s economy.Today’s spending cap growth formula is based in part on the personal income growth of 2002 and 2003, when the state’s economy was stagnant.In addition, the base reflects the budget cuts of those lean years.As a result, the state would have to cut current services significantly to stay under the cap in fiscal year, even though the economy is growing.

“The economic recovery highlights long-standing concerns with the cap’s design.If these are not addressed, the spending cap will present Connecticut with a challenge for a long time to come,” says McNichol.

A few modifications in the spending cap’s calculations -- changing the calculation of the growth factor by using a more current measure of personal income, for example – would create a more accurate representation of the state’s economy.In addition, rebasing the cap’s calculation by modifying the way spending from surpluses is treated and/or adjusting how new federal funds are treated under the cap also could create more room under the cap, according to McNichol.

In addition, the spending cap structure has weakened rather than improved Connecticut’s accountability. For example, the cap has led to the increased use of budget practices that remove significant parts of the budget from the oversight of the appropriations process.

Scroll down to view spending cap calculations based on the most up-to-date data from the Office of Policy and Management (OPM), or contact Public Affairs Officer Maryland Grier at 860.224.2200 ext. 32 or Maryland@cthealth.org.

The Connecticut Health Foundation (CT Health) is the state’s largest independent, non-profit grantmaking foundation dedicated to improving the health of the people of Connecticut through systemic change, program innovation and health policy analysis.  Since it was established in July of 1999, CT Health has awarded 348 grants in 43 cities and towns totaling over $28.2 million primarily in three priority areas – children’s mental health, racial and ethnic health disparities, and oral health.

2.07 - Updated Supplement (PDF - calculated with the most recent data available.)
2.07 - Updated Slide presentation  (PowerPoint - calculated with the most recent data available.)