FY 2008-09 GOVERNOR’S MIDTERM BUDGET ADJUSTMENTS

1. FY 2008-09 GOVERNOR’S MIDTERM BUDGET ADJUSTMENTS M. JODI RELL, GOVERNOR CONNECTICUT February 6, 2008

2. Introduction – A Time For Caution • According to the National Association of State Budget Officers 19 states have announced budget and revenue shortfalls in FY 08 and FY 09 including three of CT’s neighbors • During the latter half of calendar year 2007, economic conditions in the nation began to shift due to the sub prime mortgage meltdown and contraction in credit availability • Economic indicators point to slowdown such as personal income growth in CT is projected to rise 3.6% FY 09 down from 6.3% and 4.5% growth registered in FY 07 and FY 08 respectively

3. Introduction – A Time for Caution CT is not in a position to sustain a general fund budget with significant tax cuts or large expenditure increases because: • The FY 09 revenue forecast starts with FY 08 as the base. So for next year’s budget to remain in balance, income tax collections must grow this year by 10.7% and next year by 5.4% • The general fund surplus is only $3.3 million in FY 09

4. The FY 09 Midterm Budget • The Governor is aware of this nationwide trend and, as such, is proposing a conservative budget that is responsive to the most urgent issues facing our citizens • Focusing on areas such as rising energy costs, public safety and criminal justice, transportation, and high property taxes • The Governor’s budget remains $20.4 million below the expenditure cap and grows just 4.8% above FY 08 expenditures

5. The FY 09 Midterm Budget

6. The FY 09 Midterm Budget • Total policy changes in the Governor’s budget are projected to require a net $47.4 million in additional funding • Expansions totaling $81.2 million are partially offset by $20.6 million in reductions and $13 million of carry-forwards • Major initiatives include: • $24.5 million for Criminal Justice Reform and Public Safety • $9.4 million for Hospitals and Healthcare • $12.8 million for Human Services • $5.0 million for Transportation • $6.0 million for Regional Incentives and Municipal fiscal support • $3.6 million for a new Cultural Treasures program • $2.5 million for Energy and Conservation

7. The FY 09 Midterm Budget • Today, the Rainy Day Fund balance is $1,382.2 million or 8.1% of net general fund FY 09 appropriations • Based on current estimates, the Governor’s budget provides for another $242.2 million from the FY 08 surplus to be deposited into the state’s Rainy Day Fund, bringing the total deposit up to $1,624.4 million or 9.5% of the net revised general fund appropriation in FY 09

8. Criminal Justice Reform P.A. 08-1 of the January Special Session includes tougher home invasion laws including: • A 10 year mandatory minimum prison sentence • An enhanced burglary statute for all burglaries at night • An improved persistent offender law that makes it easier for prosecutors to seek longer sentences for repeat offenders • More rights for victims • Better coordination of services between the courts, DOC and the Board of Pardons and Parole

9. Criminal Justice Reform Criminal Justice budgeting for the impact of January Special Session • 300 new GPS devices and 9 Parole Officers to monitor the offenders • Service enhancements for victims of crime which added 2 positions • $125,000 to provide a secure video link between DOC and the Board of Pardons and Parole • $6.5 million for re-entry and diversionary beds • $2 million for secure residential treatment facilities for sex offenders • $750,000 for a state-wide automated victim information and notification system • $1.7 million to expand re-entry and diversionary services contracted through DOC and the Judicial Department

10. Criminal Justice Reform Governor Rell’s New Reforms: • $107,000 for DMV to issue IDs to all inmates lacking identification who are legal residents • Funding in DSS to expedite eligibility for SAGA for inmates being released – provides uninterrupted health care services • 9 probation staff and $414,000 to establish one additional warrant squad to increase the number of warrants served for violation of probation by 50% • $566,000 for the Connecticut Offender Re-entry Program (CORP) in DMHAS which targets offenders with serious psychiatric disabilities • 125 additional Correction Officers • DOC is reconditioning Carl Robinson Correctional Institution in order to increase the total additional capacity by 342 beds

11. Criminal Justice Reform Governor Rell’s New Reforms: • $500,000 to expand Urban Youth Violence Prevention funding • 3 support positions to the Board of Pardons and Parole to expedite and insure the completion of files prior to review • Registered sex offenders must obtain a motor vehicle operator’s license or ID card issued by DMV with a designated marking • $100,000 for a DMHAS pilot to serve individuals who cycle through jail and homelessness, targeting Hartford, Bridgeport and New Haven • $2.3 million to redirect 55 of the new criminal justice beds to those with mental health needs and provide for the additional cost of more intensive mental health programs

12. Criminal Justice Reform Governor Rell’s New Reforms • Expanded DNA collection from: • Inmates in correction facilities not yet tested and persons newly incarcerated • Those charged with Class A and B felonies • Those convicted of felonies and certain misdemeanors released without being incarcerated must submit to a DNA collection upon disposition of the case

13. Criminal Justice Reform • P.A. 08-1 of the January Special Session provides $2 million in FY 09 for a comprehensive, statewide system for the sharing of criminal justice information among the various law enforcement and criminal justice agencies Governor Rell is proposing: • Additional funding in DOIT for technology needs related to criminal justice initiatives • $293,577 for five IT positions and related costs • $1,550,000 for associated systems costs • A bond authorization of $8 million to begin the implementation of systems to meet the needs of the criminal justice community as follows: • Division of Criminal Justice Case Management System • Criminal Justice Information System (CJIS) Master Plan • COLLECT System Revisions

14. Criminal Justice Reform

15. Public Safety Highway and Truck Safety Governor Rell demands improvement in highway safety: • 100 additional state troopers over the next 5 years for traffic enforcement beginning with 20 in FY 09 • A pilot program for electronic speed cameras aimed at catching and ticketing speeders • Target companies with vehicles that have a history of failing safety inspections • $700,000 for the addition of 10 Commercial Vehicle Safety Inspectors within the DMV to enhance inspection squad activity • DMV will be able to deploy 2 additional truck squads to areas as needed • Require increased coverage of the Greenwich weigh station, adding three Saturday shifts every month

16. Public Safety Governor’s Midterm Budget Adjustments provide for: Infrastructure Assurance: • 42 Inspectors and maintainers for bridge repair and maintenance - inspections to occur every 2 years • Additional 50 DOT engineers for more in-house design and oversight of transportation projects

17. Public Safety Other Safety Initiatives • Teen Driving- Increased penalties for certain violations • Ice missiles • Boating under the influence • Tougher anti-methamphetamines laws • Computer crimes against children • Additional 8 positions at DEMHS to handle critical functions • State wide Reverse 911 system for emergency notification

18. Health and Human Services Relieving our crowded emergency rooms • DMHAS to initiate a pilot emergency assessment or crisis response center • $100,000 for DSS to conduct an information campaign to encourage HUSKY clients and Medicaid recipients to seek out appropriate primary care providers • $2 million for DMHAS to purchase three 15-bed high intensity programs for individuals with co-occurring psychiatric and substance abuse disorders, targeted to high users of hospital emergency departments • $1.5 million for DMHAS to purchase 8 beds in private psychiatric hospitals to facilitate transfers out of hospital emergency departments • Nearly $1.0 million for DCF to continue the enhancement and expansion of emergency mobile psychiatric services

19. Health and Human Services Improving Oversight of Long Term Care Facilities and Enhancing Community Placements • 5 new staff for DPH to increase inspections to assure quality care in nursing homes • 5 new staff for DSS to increase financial oversight of nursing homes • Efforts to serve more individuals in community settings rather than in long-term care facilities: • Money Follows the Person: $6.5 million in FY 09 to implement community placements for persons currently served in nursing homes to place 700 persons in the community over the next 5 years • $1.3 million for an online nursing home placement screening system in DSS to ensure that nursing home placements are appropriate • Implement Special Needs Trusts to allow persons in Residential Care Homes to remain there when their income changes • $4.6 million in DSS and DMHAS (annualized at $9.5 million in FY 10) to move individuals with psychiatric disabilities from long term care facilities to community settings – which provides for an additional 230 mentally ill individuals in community settings by FY 11

20. Health and Human Services • $8.0 million and additional staff at DDS • $1,154,000 for 46 additional high school graduates and age outs requiring day and residential services, in addition to $25.1 million already in the FY 09 budget to fund 382 placements and annualization costs • $5.1 million related to costs of 90 children who entered the DDS system in FY 08 through the Voluntary Services program • $1.5 million for 60 additional Voluntary Services referrals • $311,203 for 6 new case management positions to address caseload ratios • Maintains the commitment to fund 150 placements per year for persons on the waiting list

21. Health and Human Services • $28.2 million and additional staff at DMHAS • 18 positions and $1.3 million for 10 medium security step down beds to address overcrowding at DMHAS’s Whiting Forensic Division • $12.3 million and 126 positions to improve inpatient services and maintain accreditation at Connecticut Valley Hospital • $2.6 million to partially annualize costs of 45 young adults transferring from DCF to DMHAS during FY 08

22. Health and Human Services • $4.9 million for the DPH for immunizations • CT has consistently been among the leaders in the nation in terms of the numbers of children that receive age-appropriate immunizations and vaccines • The additional funds will assure the provision of the pneumococcal conjugate and hepatitis A vaccines for infants • An increase in staff of 5 at DPH to increase both the number and frequency of inspections of child care facilities, thereby enhancing the quality and safety of child day care • $11.2 million in new resources for the DCF to continue to make gains in child protection and child welfare

23. Health and Human Services Veterans • Tuition waivers for surviving spouses and dependent children of Connecticut’s military service members killed in action • Will allow those family members to attend the University of Connecticut, the Connecticut State University System, or Connecticut’s Community-Technical Colleges • $250,000 for the Department of Veterans’ Affairs to expand support services for returning veterans and their families • Waive fees for Gold Star Family license plates

24. Health and Human Services Maintaining Our Investment in Supportive Housing • In 2006, Connecticut received a national award for its innovative and cost-effective approach to addressing chronic homelessness through supportive housing • Governor Rell is proposing to annualize $3 million in supportive housing debt service in order to provide 150 new units of supportive housing through the issuance of $35 million in bonds • This expansion will bring the total number of units funded under Governor Rell’s Next Step Supportive Housing initiative to 850

25. Health and Human Services Increasing Anti-Tobacco Efforts • Our economic disincentives have been successful in reducing tobacco use. As the cigarette tax has increased cigarette sales have declined by over 28% since 2000 • Our statewide ban on public smoking and targeting youth smoking through policies such as the school health guidelines on tobacco education have resulted in the rate of cigarette smoking among CT high school students dropping from 26% to 17%, well below the national rate of 22% • CT ranks 4th lowest in the nation in the prevalence of smoking as a percentage of its total population (17%) • Governor Rell is proposing a substantial increase in the amount of tobacco prevention and control expenditures in CT each year by allowing the Tobacco and Health Trust Fund to disburse up to half of the annual deposit into the trust fund up to a limit of $6 million annually (the fund can only spend approximately $800,000 this year)

26. Health and Human Services

27. Health and Human Services Implementing a Medicaid Hospice Benefit • Governor Rell proposes a Medicaid hospice benefit no later than February 1, 2009 • Unfortunately, CT will be one of the last states in the nation to cover hospice services under the Medicaid program • The hospice benefit provides coverage for an individual’s terminal illness • Hospice services generally involve provision of care in the individual’s home and are geared to helping avoid placement in an institutional setting ultimately improving the quality of life for the individual as well as the family • Any additional costs of providing hospice services in home and community settings are expected to be offset by reductions in end-of-life inpatient and other institutional care

28. Education Education Cost Sharing (ECS): Governor Rell’s Investment in the State’s Children • In the two years of the FY 09 Biennium, the state budgeted $3.7 billion for the ECS grant, the state’s largest municipal grant • With this investment, the state will have spent $453 million more on ECS than it did in the previous biennium

29. Education Special Education Growth With No Cap On State Reimbursements

30. Education Children from disadvantaged backgrounds who attend a quality preschool are more likely to succeed in school, attend college, and have stable jobs, all of which makes them better and more productive citizens

31. Economic Development Initiatives Workforce Development • Nanotechnology • Nanotechnology, a multi-disciplinary field, draws upon CT’s strengths in the fields of material sciences, biology and chemistry, and its economic drivers in the manufacturing and biotechnology fields • $2.5 million is proposed for matching grants to UConn and Yale to finance the acquisition of specialized equipment and to create shared use facilities accessible by industry, faculty, and students • The Yale center will be oriented towards bioscience while the UConn center will be oriented towards material science leveraging the core competencies of each institution and matching key economic drivers • $500,000 is proposed for matching grants to support graduate student, university, and industry collaboratives

32. Economic Development Initiatives Workforce Development • $500,000 to support a mostly on-line Alternative Route to Certification for early childhood educators • $295,000 at Connecticut State University, to increase the annual number of nursing graduates in the state by 24 by the end of FY 09 • $140,000 in operating funds and $520,000 in one-time surplus funds for the Community-Technical Colleges to support an additional 64 nursing students by FY 10 • $300,000 for an engineering loan reimbursement program. The program will offer reimbursements of outstanding student loans to CT engineers who work in the state • $125,000 in funding for the creation of a “Green Collar Jobs” program to be offered by the states Vocational-Technical Schools to train students in energy efficient building, construction and retrofit work and energy technology

33. Economic Development Initiatives Cultural Treasures Program • Consolidating existing resources and adding $3.6 million of new funding, Governor Rell creates a $10 million Cultural Treasures grant program • Unprecedented resources for arts, culture and tourism programs • Not less than 25% of the program’s resources must be spent on smaller programs which play such important roles in our state • Governor Rell also creates a $20 million capital Cultural Treasures grant program • Will enhance the state’s impressive and enriching arts, cultural, historic and tourist venues • New program will provide grant financing, not exceeding 20% of the total cost of the project, to assist with capital improvement projects

34. Responsible Growth Governor Rell proposes to: • Statutorily define “Responsible Growth” • Create a Responsible Growth Cabinet (RGC) which will: • Advise on Responsible Growth policies and initiatives • Coordinate and facilitate funding and permitting for “Developments of Regional Significance” • Establish a “Walk the Walk” program – any development receiving state funds must invest no less than 2% of total project cost to pedestrian and other non-motorized transportation improvements

35. Responsible Growth On the municipal level Governor Rell proposes: • Local zoning commission decisions to be consistent with local Plans of Conservation and Development (local option) • Funding for the drafting of a model Connecticut Responsible Growth Zoning Code • Statutory changes to allow municipalities and developers to enter into voluntary Community Benefit Agreements • Improvements to, and continued funding for, the existing Regional Performance Incentive Program

36. Governor’s Property Tax Reform Package • Nationally, the issue of rising property taxes has been pushed to the forefront by citizens and elected officials looking for solutions • There has been talk of property tax reform at the state Capitol for years • Governor Rell knows that a property tax cap, while a critical tool in controlling property tax growth, by itself is not a solution • The Governor is proposing a multi-pronged system of reforms to address the problem of ever rising property taxes • These reforms will work together to provide relief to our local taxpayers

37. Governor’s Property Tax Reform Package Mandate Relief • The Governor proposes a statutory prohibition against new costly unfunded mandates on cities and towns unless such mandates are enacted by a 2/3rds vote of the General Assembly • The Governor is also proposing immediate relief from some current unfunded mandates. Specifically, her proposal will: • Increase the threshold covered by prevailing wage requirements to $1 million for new construction projects and $500,000 for repairs or alterations. These increased threshold amounts would also be indexed to inflation • Amend the Teachers Negotiation Act (TNA) to require fully stipulated awards be considered negotiated agreements and submitted to the local legislative body for review (Program Review and Investigations recommendation) • Eliminate the requirement that municipalities remove and store the personal property belonging to evicted residential tenants • Allow a municipality that maintains a website to post certain notices on the municipality’s site in lieu of paying to publish them in the newspaper

38. Governor’s Property Tax Reform Package Municipal Aid • The Governor understands that property tax relief cannot happen without a commitment from the state • Governor Rell led a successful effort on education finance reform that resulted in the current biennial budget which includes the largest increase in municipal aid in recent years • For FY 08, municipal aid increased almost $230 million over FY 07 • Municipal aid will increase at least another $126 million from FY 08 to FY 09 • Total formula grants to municipalities will have increased by over $650 million since the Governor took office (an increase of over 31%) • Multi-year authorizations for local school construction

39. Governor’s Property Tax Reform Package

40. Governor’s Property Tax Reform Package Property Tax Limit • Governor of New York is calling for a commission to study a property tax cap • Rhode Island, New Jersey and Maine have recently enacted property tax caps • Connecticut is one of only 7 states without a local tax or expenditure limit • The simple fact is that when done right, a tax cap works • Massachusetts instituted a property tax cap in 1982 • Since then, its per capita property tax burden dropped from number one in the nation to eighth • Its schools are consistently rated among the best in the country • The ratio of public safety personnel per capita in Massachusetts exceeds that in Connecticut • On the other hand, California’s Proposition 13, which threw that state’s local tax system into disarray, was not effective

41. Governor’s Property Tax Reform Package

42. Governor’s Property Tax Reform Package Property Tax Limit • Effective July 1, 2009 a municipality’s property tax levy will be limited to no more than 4% above what the municipality levied in the prior year; the limit would be 3.5% July 1, 2010 and 3% July 1, 2011 and thereafter • Recognizing that one size does not fit all, the Governor allows municipalities to opt out of the cap for two-year periods • To opt out, a 2/3rds vote of a municipality’s legislative body will be required not later than September 30, 2008 and every other year thereafter together with approval of a simple majority of a municipality’s voters in the following November elections

43. Governor’s Property Tax Reform Package Property Tax Limit With the approval of the local legislative body, exemptions would be available for: • Increases by more than 8% over the prior year in employee health insurance, actuarially recommended contributions to pension or other retirement benefits or utility costs • Regional school district increases above the 4%, 3.5% and 3% cap, plus any new ECS aid over the prior year • The amount by which certain state formula aid decreased over the prior year • Debt service increases for capital projects over the FY 09 level • Expenses related to an emergency, such as a fire, flood, a declared health emergency or natural disaster (which would not be built into levy base) • One-time costs associated with regional service initiatives (which would not be built into the levy base) • General overrides, which would require 2/3rds approval of the local legislative body with voters able to reverse any legislative action to override the limit

44. Governor’s Property Tax Reform Package Property Tax Limit • Personnel costs consistently make up the largest portion of municipal budgets. The Governor’s proposal requires arbitrators to give an irrebuttable presumption that a municipality or district cannot exceed the cap • To help our municipalities save for the possible economic downturns, arbitrators must also presume that a budget reserve of 10% or less is not available to pay for any award

45. Governor’s Property Tax Reform Package The Governor’s proposal includes provisions to promote and enhance operational efficiency • $500,000 in FY 09 for a Municipal Operational Efficiency Study grant • $500,000 for the Auditors of Public Accounts to review the operating and budget practices of selected municipalities in which total state grants-in-aid in a fiscal year exceed 35% of the municipality’s operating budget and make recommendations for programmatic savings, efficiencies, financial improvements and reforms in the municipality • OPM will issue best practices guidelines to assist towns in developing 5 year energy conservation and procurement plans • Provides funding for the adoption of 5 year health cost containment plans, to be developed in consultation with their employee collective bargaining units • Regional Performance Incentive Program, $5 million will be available for groups of cities and towns seeking to voluntarily join together to provide efficient and cost effective delivery of services

46. Consumer Protections • The Governor has established $50 million CHFA sub-prime rescue fund for low and moderate income borrowers to refinance into stable mortgage product • New and more extensive disclosure requirements for certain home loans and elimination of the pre-payment penalty for certain home loan refinances • Increased criminal penalties for violating the Child Protection Safety Act • Identification Theft Task Force Recommendations – new privacy protection statute

47. Transportation Over the last 3 years Governor Rell and the General Assembly have worked together to provide unprecedented funding for transportation enhancements throughout the state. These initiatives include: • New railcars for Metro North and Shoreline East commuter lines • Development of the New Haven to Springfield Commuter Line and the Hartford-New Britain Busway • Numerous congestion mitigating projects along I-95 and the state’s other highways • Utilizing Responsible Growth principles to create new and renovated rail and intermodal stations so that these significant transit developments can leverage economic development in proximity to the public transportation systems

48. Transportation • Notwithstanding the continued commitment of thousands of dedicated state employees, the old DOT as an institution has simply become too bureaucratic, too inefficient, and too single minded in its approach to problem solving • Bold reforms are necessary if the citizens of the state are to obtain the level of service to which they are entitled and if the state is to realize the intended results of the initiatives adopted in the past 3 years

49. Transportation Transform the Old DOT into Two New Highly Focused Agencies • Creation of two departments: the Department of Highways and the Department of Public Transportation, Aviation and Ports • Effective January 1, 2010, this reconfiguration of transportation services will: • Allow each agency to better focus on its mission and systems that promote its goals • Enhance the standing of public transportation and explore its ramifications for development and conservation • Provide for new and more efficient processes to accomplish the initiatives adopted • Promote more specialized expertise and abilities within each agency

50. Transportation As recommended by the Governor’s Commission, the Governor is proposing: • Create a Chief Operating Officer position accountable to the commissioner for the day to day operations of the DOT and the implementation of department wide policies • Create an Office of Strategic Planning and Evaluation reporting directly to the commissioner of DOT. This office will work closely with the Transportation Strategy Board and other agencies to provide a more long-term, comprehensive and strategic view of transportation • Add financial positions to enhance DOT financial operations and provide timely federal reporting and audit capacity • Separation of the Bureau of Engineering and Highways to enable Engineering to operate as a shared service and to develop more engineering capability tailored to public transportation needs • The implementation of a “511” system to allow the public to telephonically retrieve timely, accurate and reliable travel information • The establishment of a Citizen Representative to receive day-to-day feedback from the public on transportation issues