No Cuts to Human Services!

There are many options available to the Legislature that will close the deficit without doing further harm to the economy or to Connecticut’s low-income families and their children. The Governor’s proposed cuts to Human Services will hurt children and families the most during this economic downturn.

Cutting spending now is both the wrong economic policy and it will put our most vulnerable citizens at risk.

· While a $300 million deficit may seem large, it is less than 2.5% of the budget. We need more information before making any drastic changes to the state budget.

• Many leading economists, including the 2001 Nobel Prize in Economics recipient Joseph Stiglitz, agree that state spending cuts would impact negatively on the economy. Studies have shown that a tax increase is preferable to spending cuts at the state level during a short-term economic downturn. Cutting spending now will only have the effect of risking an increase in unemployment, fueling the recession, and further reducing tax revenues.

There is not an adequate “Safety Net” for low-income, working families.

• The Department of Social Services estimated that more than 2,800 people will exhaust their cash benefits in the next six months. Many of these people are working low-wage jobs and relied on cash assistance to make ends meet. They will be the first to lose their jobs or have their hours cut back due to lack of seniority. Most will not be eligible for unemployment benefits.
• On average, you need to earn $16.45/hour in Connecticut to afford a modest, two-bedroom apartment. Stamford-Norwalk is the third most costly market in the nation.
• Of Welfare-to-Work (Jobs First) participants who were still receiving cash assistance while working, 56.5% of them earn less than $7.50/hour and 90.3% earned less than $12/hour. 59% of them do not have any kind of subsidized or public housing.

Demand for food and housing assistance has increased significantly.

• Homeless shelters across Connecticut are full. Shelters serve about 16,000 people each year. This year, there has been an 86% increase in the number of people turned away due to the shelter being full.
• Food pantries and soup kitchens report serving the same clients more often and that they are more desperate, sometimes with no income at all. At the Place of Grace Food Pantry in Hartford, the number of families served per week is up 160%, from 75 families a week last year to 200 families a week now. They have less food to give out. They used to be able to give out 5 bags of groceries per family, now they can only give 2.
• Every available state dollar should be used for supportive services for low-income residents.

Any further cuts to Human Services will seriously hamper Non-Profit Service Providers’ ability to help the working poor weather this economic slowdown!

• The Governor has already cut critical human services for CT’s most vulnerable citizens by 5%. The Governor has recommended further cuts to Human Services!
• While CT’s Non-Profit Service Providers are efficient and effective it will be impossible to continue to provide services when the safety net has been shredded.
• Further cuts would mean a roll back of programs for low-income clients, especially those that require intensive case management services and provide little or no administrative funds, such as Individual Development Accounts.

Don’t balance the budget on the backs of the families who need help the most and are least able to afford it!

There are six options for balancing the state budget. Used in combination, they will prevent devastating budget cuts that will only hurt low-income working families and their children, as well as worsen the economy:

1. Collect all that is due Connecticut from the Federal Government

· In recent years, the rationale for not seeking unclaimed federal reimbursements and new federal grants was the spending cap limitation. Now that we have a state budget deficit, the spending cap is not the issue. State agencies should seek all available federal funds before they are told to cut programs.

· The DSS report, Delivering and Financing Children’s Behavior Health Services in CT, states that CT can increase federal Medicaid reimbursements for children’s behavioral health services by at least $14 million.

2. Review tax expenditures (credits, exemptions, exclusions and deductions, costing up to $291 million in FY2002).

· Fairness and equity demand that this option be utilized to balance the state budget. CT’s gap between rich and poor and the poverty rate continued to grow in the 1990’s.

· Postponing the final phase out of the Estate & Inheritance Tax, which will only benefit the distant relatives, would save the state $30 million this year and $40 million next year. Postponing special corporate tax breaks could save $77 million this year and next year.

3. Enact targeted revenue increases, such as an increase in the cigarette tax.

· Increasing the tax on cigarettes from 50 cents to $1 a pack would generate $55 million in this fiscal year and would serve both a fiscal purpose and a public health purpose. New York, Rhode Island and Massachusetts have all hiked cigarette taxes beyond Connecticut's rate.

· Professor Fred Carstensen at UCONN’s Center for Economic Analysis, says that according to their analysis, the state could increase income taxes on higher income residents, lower the sales tax, and still see an increase in revenues to the state. This would also reduce the overall tax burden on individuals because they can deduct the state income tax from their federal income tax.

· A tax increase on higher income individuals is preferable to spending cuts to programs for low-income people because low-income people would have to reduce their spending immediately, whereas high-income people in most cases will not reduce their spending. All economists agree that increased consumer spending is the only way we will turnaround the economy.

4. Use Bonding for certain capital projects.

· Capital projects are a proven way to stimulate the economy. Surplus funds had been approved for school construction ($75 million in FY 02 and $50 million in FY 03), purchase of open space ($30 million) and other capital projects. Now that revenues have fallen and interest rates are low, it makes economic sense for the state to use bond funds to pay for capital projects.

5. “Spend it smarter” on programs that lead to cost-avoidance in the future.

· Some proposed budget cuts are “penny wise and pound foolish” because they lead to higher expenditures at a later time. For example, the Governor has proposed nearly $18 million in cuts to community-based mental health services for adults and children. These services will be much more cost-effective than our current practice of utilizing costly institutional care. In FY01, CT spent over $45 million on 450 children sent out of state for residential care and paid $27 million in re-insurance, essentially paid double, to cover the costs of Medicaid children who are “stuck” in in-patient settings because they could not be released due to the lack of adequate services in the community.

6. Use a Portion of the Budget Reserve (or “Rainy Day”) Fund.

· The fund was established for just this purpose. Leading economists believe CT’s economy will rebound by the 2^nd or 3^rd quarter of 2002. Revenue shortfalls should be constrained to this fiscal year. Using a portion of the Rainy Day fund will buy time until economic trends can be properly ascertained. This will prevent a needless and reckless slashing of the state budget.