Connecticut lawmakers yesterday appeared to have reached agreement on $950 million of deficit borrowing to balance the state’s biennial budget.
Derek Slap, spokesman for the Senate majority Democrats, said that an agreement with Gov. M. Jodi Rell was in place, though lawmakers were debating the budget bill at press time.
The state’s 2010 legislative session was to end last night at midnight and lawmakers were expected to work late.
Rell spokesman Adam Liegeot said he could not confirm that a deal was in place.
The deal would close a $2 billion budget gap. Officially, the deficit for fiscal 2011 was pegged at $700 million, but that assumed an undefined $1.3 billion securitization would be in place.
In place of the securitization in fiscal 2011, Slap said agreement called for the issuance of deficit bonds in fiscal 2010 and shifting the use of rainy-day funds from the current fiscal year into fiscal 2011.
The deficit bonds, which Budget Bill 494 refers to as economic recovery revenue bonds, would be secured by existing surcharges on utility bills.
One of those surcharges, created to pay so-called stranded costs related to utility deregulation years ago, was due to expire but would be extended under the borrowing plan.
The other surcharge currently backs a clean energy fund.
A combination of better-than-expected income tax revenues and budget cuts reduced the needed borrowing by $350 million to $950 million, Slap said. The bonds would have maturities of up to eight years.
Connecticut did a similar deficit borrowing in 2004 and 2002, selling $100 million in 2004 and about $220 million in December 2002 for fiscal year 2003, to close its budget gap.
In December, the state sold $916 million of notes to close a fiscal 2009 deficit. The wealthy state is heavily reliant on the finance and insurance sectors, which are vulnerable to economic distress such as the current recession.
“This kind of response is what the pattern has been for Connecticut because the revenue base is so volatile,” said Standard & Poor’s analyst Robin Prunty. “It’s the third time they’ve done economic recovery notes and there’s been other transactions that have allowed them to bridge to a more stable revenue environment.”
The budget gap-closing plan also cuts $170 million and counts on $350 million of additional federal funds that have not yet been enacted by Congress.
In September, the Democratic-led General Assembly passed a $37.57 billion biennial budget, which Rell, a Republican, allowed to become law without her signature.
Last month lawmakers enacted a $500 million deficit-closing package for fiscal 2010.