May 4, 2018

Voices from the Capitol: A Call to Action - The Clock is Ticking on the Bond Lock

Roger Senserrich

In today’s email:

Legislative Priorities

The Bond Lock

The Bond Lock continues to be our main focus - and with the final day of the session less than a week away, the need for action becomes more and more urgent.

The good news is that the House of Representatives debated the bill that delays most of the Bond Lock Tuesday evening (H.B. 5590), including a new amendment introduced by Representative Rojas and Senator Fonfara. The bad news is that the bill did not receive a vote. Legislators have assured us that the bill is not dead and they are continuing negotiations.

Time, however, is running out. The Bond Lock is an untested legislative provision that can completely upend the budget process for more than a decade. It has the potential to crowd out investments in children, family well-being, and economic development and will have implications that extend long after the Bond Lock expires. The General Assembly must act now to prevent this legislative provision from severely undermining its fiscal authority for more than a decade, creating a cloud of uncertainty over Connecticut’s budget.

The newly introduced amendment moves the bill in the right direction, but still falls short of a full delay. It postpones implementing the Bond Lock for a year on three of the fiscal restrictions - appropriations cap, spending cap, bond cap - instead of just two, but it will still include a promise not to change the volatility cap in bonds issued after May 15th this year. The amendment also reduces the length of the bond covenant requirements from ten years after first bond issuance to five years, and excludes some additional bond types from including a Bond Lock covenant.

Although the amended bill would be an improvement, it is not enough. Connecticut Voices for Children urges legislators to consider a delay of the Bond Lock without exceptions, or a full repeal of the Bond Lock.

Call to action: Speak Up Against the Bond Lock

The Connecticut General Assembly is slated to vote on H.B. 5590, "An Act Concerning Covenants and the Bond Issuance Cap."

H.B. 5590 would not fully repeal the existing Bond Lock; rather, it would partially delay implementation. Under this proposal, bonds issued after May 15, 2018, would include a covenant locking in the volatility cap. Bonds issued after the end of the session (July 1, 2019, onwards) would lock in the spending, appropriations, and bond caps.

While an improvement over current law, further change is needed. We are calling legislators to amend the bill to:

  • Delay the effective date of all provisions of the Bond Lock until July 1, 2019.

  • Study and issue a report on the impact of the Bond Lock, with a committee hearing on the same, prior to the new effective date.

We urge you to join us in requesting the passage of an amended bill. Inaction is not an option, for existing law poses real threats to our state. If implemented, the Bond Lock would:

  • Risk billions of dollars in cuts to social services and other crucial programs for children and families in the state.

  • Create uncertainty regarding Connecticut's fiscal health, potentially damaging our credit rating and increasing our borrowing costs.

  • Leave Connecticut powerless to respond to emergencies. We do not know what the federal government is going to do regarding funding. We don't know if a natural disaster is coming. With the Bond Lock, we do know that we cannot address any of these challenges without facing serious penalties.

Other Legislative priorities


Bills that we support:

S.B. 323 An Act Requiring Notice Prior To The Transfer Of A Child To A New Placement. A bill that emerged from our “Youth at the Capitol” event, it passed the Senate on consent last week (that is, unanimously). It is currently waiting action on the House Calendar. Thank you to Sen. Formica and Sen. Suzio for raising and championing this bill in the Senate. We hope that Rep. Urban and Rep. Zupkus will do the same in the House.

H.B. 5210 An Act Mandating Insurance Coverage Of Essential Health Benefits And Expanding Mandated Health Benefits For Women, Children And Adolescents.The House amended the original bill, passing it on a 114-32 vote. It is currently on the Senate calendar. We thank Sen. Scanlon for his leadership on this bill.

S.B. 455 An Act Concerning Minority Teacher Recruitment. The bill passed the Senate yesterday on consent, with substantial proposed amendments. The amendments to this bill are mainly favorable, including the requirement that local school boards collect and report to SDE on the demographics of applicants to positions that require an education certification and the development of alternative routes to certification for Veterans, Charter School Educators and Paraeducators with Bachelor's degrees. It is currently on the Senate Calendar.


No movement yet:

S.B. 256 An Act Concerning Racial and Ethnic Impact Statements. This bill is on the Senate calendar.

H.B. 5415  An Act Concerning The Collection And Usage Of Health Equity Data. This bill is on the House Calendar.

H.B. 5517 An Act Concerning Executive Branch Executive Priorities. This bill is on the House calendar.

H.B. 5449 An Act Concerning The Administration Of Certain Early Childhood Programs And The Provision Of Early Childhood Services By The Office Of Early Childhood. Tabled for the House Calendar.


Bills we oppose:

H.B. 5328 An Act Concerning The Admissibility Of Admissions, Confessions And Statements By Children Under The Age Of Eighteen. This bill is on the House Calendar. Unless legislators vote on it along with a currently uncalled amendment, we oppose its passage.

H.B. 5445 An Act Concerning The Development Of Policies Regarding The Provision Of Alternative Educational Opportunities For Expelled Students By Boards Of Education. This bill is also on the House Calendar. You can read our testimony here.

S.B.453 An Act Concerning Classroom Safety and Disruptive Behavior. This bill is on the Senate Calendar; read our testimony here.

S.B.316 An Act Establishing A Child Care Facility Neighbor Relations Task Force. This bill is on the Senate Calendar. Read our testimony here.

S.B. 486 An Act Concerning Notification To Boards Of Education Of The Release Of A Juvenile Sexual Offender And A Model Policy Concerning The Reentry Of Such Juveniles Into The School System. Also waiting on the Senate calendar. Read our testimony here.


Analysis: Budget Proposals

First, the good news: tax collections are up by close to $2 billion, potentially making the General Assembly’s task of balancing the budget much easier. However, most of that surge in revenue will go into the Budget Reserve Fund, not the General Fund, following the new volatility cap rules. The CT Mirror has a good overview of the causes of this revenue surge, and how state agencies predict that the large increases will not continue over time.

The General Assembly, meanwhile, continues its work on the budget. On April 20, the Appropriations Committee and legislative Republicans put forward their proposals to modify the Fiscal Year (FY) 2019 budget adopted last October. We analyzed both plans in our new budget report, comparing them to the Governor’s initial proposal. Our conclusion was that all three budget plans struggle to promote policies that support opportunity for all children and families, despite restoring some program funding, and that they do not increase revenues significantly. You can read the full analysis here.

Following the newly revised higher revenue estimates, Republicans released a revised budget document on Wednesday. We are currently going over the details, but the CT Mirror has a good overview here.

The Bond Lock under this Budget Proposals

Neither of the legislative budget proposals address the Bond Lock or include any changes to this legislation. Both plans breach some of the budget rules that the Bond Lock would cement into place for the next decade, highlighting the need to rethink its application. The funding in the Appropriations Committee bill exceeds the spending cap limit, while the Republican proposal breaches the volatility cap, using some of the additional revenue to fund the budget rather than  the Budget Reserve Fund. As we discuss in our budget analysis:

Getting around the volatility and spending caps this year may not be too heavy a lift, but the fact that both parties seek relief from the fiscal restraints they enacted just a few months ago should give pause to those who want to lock in the restraints through the use of broad bond covenants. While fiscal restraint is advisable, some amount of agility is necessary for unexpected circumstances. In the coming years, federal laws may decrease or delay Connecticut’s Medicaid funding. Natural disasters may bring evacuees to Connecticut, as did Hurricane Maria. The Bond Lock would make responding to these or other unforeseeable challenges much more difficult, if not impossible.

In Case You Missed It: Bond Lock Op-Ed

CT by the Numbers published this weekend an op-ed by Associate Policy Fellow Ray Noonan and Fiscal Policy Fellow Rachel Silbermann about the threat that the Bond Lock represents to Connecticut´s long-term fiscal health.

Connecticut’s future lies in opening new pathways to economic growth and opportunity for businesses, families, and communities. To achieve these goals, Connecticut needs a predictable and coherent fiscal policy that enables lawmakers to make the strategic choices that can spur economic growth. Unfortunately, a set of fiscal restrictions added to the budget in the final hours of negotiations last year might bring significant uncertainty on future fiscal policy and leave legislators unable to respond to current and future crises.

The fiscal restrictions – spending cap, bonding cap, volatility cap, appropriations cap, and Bond Lock – place a set of rules to guide Connecticut's fiscal policy. When well-designed, fiscal restrictions can help create a strong foundation for the state´s budget practices, enabling legislators to focus on forward-looking investments to generate opportunity and spur economic growth. When hastily designed, however, restrictions may constrain fiscal policy to the point of making it wholly ineffective.

You can read it here.

Federal Update:

The new Farm Bill is slowly moving forward in Congress. After a favorable vote in the Agriculture Committee, the House plans to vote on the bill next week. The proposed legislation has many problems, and would greatly increase food insecurity for low-income families that rely on this program. The Center on Budget and Policy Priorities´analysis is clear:

The nutrition provisions of the farm bill that the House Agriculture Committee passed on April 18, if enacted, would increase food insecurity and hardship. The proposed changes to the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) would end or cut benefits for a substantial number of low-income people.

SNAP is the country’s most effective anti-hunger program, helping 1 in 8 Americans afford a basic diet, with most SNAP participants being children, seniors, or people with disabilities. Despite providing modest benefits — averaging about $1.40 per person per meal — the program combats food insecurity, alleviates poverty, and has long-term positive impacts on health as well as on children’s educational attainment. The Committee’s proposal would reduce SNAP’s effectiveness and put large numbers of families and individuals at increased risk of hardship.

Read the full report here.

What We Are Reading

Issue Areas:
Budget and Tax, Child Welfare, Early Care, Education, Family Economic Security, Health, Juvenile Justice