Friday, April 19, 2024



Lamont Names New Chief of Staff

Drajewicz’s exit does not appear forced as he has confided for months his plan to leave in February, once the tolls issue was resolved. Drajewicz acknowledged today the resolution was not the one he envisioned: On Feb. 19, Lamont effectively gave up on Senate Democrats ever putting his plan to a vote.

By all accounts, the governor and chief of staff had developed a close relationship. Chief of staff is a job that requires a political sense, management skills, and an ability to serve as a reliable conduit between the governor, the legislature and the rest of state government.

“It’s incredibly intense, what this job is and what you go through, the paces you go through,” Lamont told reporters, outlining the changes. “And you get very close to people, and I got very close to Ryan.”

Lamont, who called Drajewicz a brother, recruited him from the giant hedge fund, Bridgewater Associates

“I said, ‘Please give us a year. I need a year.’ And he said he’d give us a year. And he gave us a year plus some,” Lamont said. “And I just want you to know that as chief of staff he’s been my friend, been my compadre. He talks me off the ledge when I ought to be talked off the ledge. He comes with me into battle when it’s time for battle.”

On transportation, Drajewicz said, he believes he followed the governor’s charge to “leave everything on the field.”

He said the efforts produced a well-received plan for what needs to be done to speed up commutes by erasing highway bottlenecks and improving rail service on Metro-North, even if the legislature could not embrace tolls as a new revenue sources.

The administration still intends to utilize the low-cost federal loan programs that were identified as a key element of CT2030, though it will have to find new sources of guaranteed repayment. “I can tell you with confidence Connecticut is going to take advantage of these programs that are offered out of Washington,” Drajewicz said.

Drajewicz, a former aide to U.S. Sen. Chris Dodd before he joined Bridgewater Associates, stepped down as Lamont’s top aide at the end of business today, but he will remain for a few weeks to ease the transition. Drajewicz, a Fairfield resident, said he has no immediate plans, other than a likely return to the private sector.

He worked for Lamont for nearly 18 months as a volunteer or staffer. Lamont had tapped Drajewicz during his campaign to craft a transition plan, then chose him to oversee the assemblage of a new administration and become his chief of staff.

“It’s a year and a half, almost, in dog years,” Drajewicz said.

Lamont and Drajewicz each arrived at the State Capitol with few close relationships in the building, and Drajewicz conceded this was an obstacle as the new administration quickly sought passage of a comprehensive system of highway tolls on all vehicles. The plan was twice downsized, most recently to trucks only tolls on a dozen highway bridges.

“It’s not a question of ‘shouldn’t have done it.’ It’s not a question of I should have pushed harder here, there or wherever,” he said. “I guess for me it was [understanding that] doing something like this requires you have to have rock-solid relations with legislators and staff.”

Drajewicz said he has developed those relationships “in the trenches” during the long fight over transportation. Had he started with them, the path might have been smoother, he said.

His successor, Mounds, was an aide to Gov. Dannel P. Malloy for five years, leaving the administration in late 2016 as the director of policy and government affairs for a policy and communications job at the Connecticut Health Foundation. He also worked on the staffs of U.S. Sen. Richard Blumenthal and U.S. Rep. John B. Larson.

“Paul, as you all know, he knows the building, and the building knows him,” Lamont said. “And if I’ve learned one thing, this is a building that really runs on relationships.”

Mounds was first named to the newly-created post of chief operating officer, a position recommended and never implemented decades ago in Connecticut, while becoming increasingly common in governors’ offices across the U.S. Last summer, he was also given the title of deputy chief of staff in an earlier staff shakeup.

Geballe, a former IBM executive and tech entrepreneur, has a resume more fitting with COOs in other states, where governors have looked to corporate executives and state agency heads for the post.

“In many ways, Josh has already been acting like a COO, which is the chief operating offier, trying to consoldiate personnel, consolidate technology, leading the search of what this government is going to look with the silver tsunami of people retiring,” Lamont said.

Demographics and a change in retirement benefits are expected to send a sizable chunk of the state workforce out the door by the end of Lamont’s first term.

By the estimates of the comptroller’s office, 14,764 state employees — a quarter of the workforce — will be eligible to retire on July 1, 2022, when a concession deal negotiated in 2017 by Malloy takes effect. It will slow cost-of-living adjustments for all new retirees and raise health costs for a few, primarily high earners.

The governor was asked today if more changes were coming.

His reply: “Not at this point.”

With CT Tolls Debate on Ice, Fiscal Issues Loom Large

“I’ve lost patience,” the governor said last week as he announced the tolls bill had fallen into political limbo. “We’re going to fix our transportation plan, and we’re ready to work with anybody who has a constructive alternative.”

What does that mean?

For the short term, the governor said, it involves shifting priorities.

On paper, the budget’s Special Transportation Fund — which repays the borrowing that sustains highway, bridge and rail upgrades —  is in fine shape, projected to run modest surpluses through 2024.

But appearances can be deceiving.

Those numbers only hold up if Connecticut keeps fixing infrastructure at its current pace that barely maintains a state of good repair — and leaves very little for strategic projects that enhance traffic flow.

The transportation fund currently supports roughly $800 million per year in state borrowing, which in turns leverages about $750 million in matching federal grants.

But DOT officials say as aging, overcrowded highways and bridges demand more costly repairs, $1.5 billion-to-$1.6 billion won’t get the job done, and something closer to $2 billion per year will be needed.

Based on that assumption, the transportation fund hits insolvency around 2025 or 2026.

As a stop-gap measure, Lamont said he favors taking about $200 million in borrowing supported by the budget’s General Fund — borrowing currently used to support school construction, conservation efforts, state building maintenance and economic development — and shifting that to transportation.

“I hate to do it this way,” Lamont said. “It’s bonding in place of other things that are priorities, but right now there’s no other option on the table.”

But another $200 million per year isn’t a long-term fix. It only postpones insolvency for a few more years, administration officials say.

Truck toll receipts would have added $150 million-to-$200 million per year.

Equally important, they would have helped Connecticut qualify for low-interest federal transportation loans.

This means Connecticut could have borrowed significantly more for infrastructure repairs.

If legislators won’t consider tolls, they could consider raising fuel taxes for the first time in seven years.

But Connecticut has two taxes that impact the price of gasoline — not to mention one of the highest fuel tax burdens in the nation.

When distributors bring fuel to local gas stations, the state applies an 8.1% wholesale tax. [A state-approved surcharge effectively raises the rate to 8.81%.]

This equates to nearly 15 cents per gallon, based on current wholesale prices, according to the according to the Connecticut Energy Marketers Association. But when oil prices skyrocketed in 2007 and 2008, the tax generated as much as 26 cents per gallon.

Regardless of the amount, gasoline station owners say they build the entire cost into the base price charged motorists, who also face a flat, 25-cents-per-gallon retail tax.

The wholesale tax last increased in 2013, following a schedule adopted in 2005. The retail tax last was changed in 2000, when legislators and then-Gov. John G. Rowland lowered it from 32 to 25 cents per gallon.

Neither Lamont nor any legislators have proposed any fuel tax hikes to date this year. The governor often has said tolls and other user fees were more reliable than increasing gasoline taxes, given the increasing fuel efficiency of vehicles.

The two fuel taxes together provide roughly half of the revenue for the $1.73 billion Special Transportation Fund.

Another option to mitigate the absence of toll receipts would be to increase sales tax revenues dedicated to transportation.

The sales tax currently provides about 30% of the STF’s revenues, and legislators passed a bipartisan plan in 2017 to increase that share steadily through the mid-2020s.

Lamont and his fellow Democrats in the legislature voted in June to scale back that increase, and Senate Minority Leader Len Fasano, R-North Haven, said officials should not deviate from that schedule any further.

More importantly, the tolls-centered transportation plan Lamont supports also was counting on sales tax transfers to the STF to ramp up again in 2022, jumping by more than $180 million that year.

In other words, maintaining that transfer plan wouldn’t push off the projected insolvency of the transportation fund. It just would stop it from happening even sooner.

And there’s also no guarantee legislators will accept the governor’s proposal to redirect $200 million in bonding away from non-transportation projects and into highways, bridges and rail lines.

Connecticut has one of the highest debt burdens, per capita, of any state, prompting Lamont 13 months ago to propose a “debt diet.”

The governor relented two weeks ago, proposing $1.77 billion in new general obligation bonding for this fiscal year — borrowing to bevrepaid out of the budget’s General Fund and not the STF.

That was more than $400 million beyond what the governor wanted, much of its focused on economic development priorities of Democratic legislators. And administration officials made it clear this was an olive branch to build support for tolls.

Now that tolls are on hold, sources say the “debt diet” is back in play.

Sen. John Fonfara, D-Hartford, co-chairman of the Finance, Revenue and Bonding Committee, said he hopes the administration’s bonding proposal from two weeks ago is still on the table.

“I take the administration at its word,” the Hartford lawmaker said. “I thought those decisions were based in good [borrowing] policy.”

Fonfara, who says bonding is a key tool for economic development and to help poor communities in lean fiscal times,  introduced a bill last year that would have wrested control of the State Bond Commission from the Executive Branch and given it to the legislature.

It sailed through the finance committee, but legislative leaders then tabled it and instead tried to negotiate a middle ground with Lamont.

But if the bonding debate gets heated, the Democratic governor may have allies on the other side of the aisle.

Senate and House Republicans have argued for the past decade that state borrowing is too high, and Fasano warned last fall that if Democrats sent a bloated borrowing plan to Lamont — and if the governor vetoed it — Senate Republicans would not support an override.

“I would still hold to that position,” Fasano said. Democrats lack the two-thirds’ majority needed to override a veto by themselves.

“I think the Republicans recognize we have to prioritize and keep borrowing within our limits, keep it as lean as possible,” added Rep. Chris Davis of Ellington, ranking House Republican on the finance committee.

The battle over the state’s credit card also extends to borrowing for school construction. And sources said another dispute between Lamont and legislators — which was put on hold during the tolls debate — is now coming to the forefront.

Who controls borrowing for school construction?

Legislators from both parties balked last November when the administration unilaterally moved the Office of School Construction Grants and Review — which annually oversees hundreds of millions of dollars in construction grants to school districts — from the Department of Administrative Services and into the Office of Policy and Management.

A high-profile agency that houses the governor’s budget staff, OPM is seen as closely involved with implementing the administration’s political agenda.

Critics said the move threatens a process that not only works well, but has traditionally been immune from politics.

“This reeks of politics,” Deputy House Minority Leader Vincent J. Candelora, R-North Branford, said at the time. “There is not a good reason to make this move.”

Administration officials said the move only was about increasing efficiency, but conceded it would require legislative approval, and submitted a bill this month to retroactively endorse the switch.

But the legislature’s Education Committee raised a bill this week to block it. Though full language hasn’t been drafted, the bill’s title starts with “An Act Prohibiting the Transfer of School Construction from DAS to OPM.”

This consternation surrounding the transfer comes at a time when the flow of money funding new school construction projects or major renovations has been significantly scaled back in recent years.

The administration has insisted that this is the result of making sure that only projects that are close to being shovel-ready are brought before the legislature for approval, and eventually by the State Bond Commission.

But Kostantinos Diamantis — who heads the school construction unit — told the Education Committee that the downturn is going to continue because of a “self-imposed cap” of about $400 million in grants per year.

Education writer Jacqueline Rabe Thomas contributed to this report.

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Lamont Keeps State Spending Lean

The administration claims Connecticut cannot afford the relief at this time, even though fiscal projections for the 2020-21 fiscal year are better now than they were when Lamont made the pledge two years ago.

“The budget you have before you today is financially responsible and pro-growth,” Office of Policy and Management Secretary Melissa McCaw, Lamont’s budget director, said during a midmorning briefing.

The latest budget proposal would grow General Fund spending in the 2020-21 fiscal year by 3.7% over the current year, which is a 0.6% increase over the preliminary 2020-21 budget he and lawmakers approved last May.

Most of the new spending in Lamont’s plan would cover rising state employee health costs, larger-than-anticipated state pension contributions, a growing demand for Medicaid services and a potential shortfall at the University of Connecticut Health Center.

Lamont’s budget holds aid to cities and towns largely flat, though it does allow a previously approved increase for the state’s largest grant — the Education Cost Sharing program — to move forward. This would boost aid to communities by $50 million next fiscal year.

Connecticut already enjoys a record-setting $2.5 billion rainy day fund, yet it still does not match the level recommended by Comptroller Kevin P. Lembo and other fiscal watchdogs to safeguard state programs and tax rates against the next economic downturn.

By keeping spending lean and continuing to save a portion of state income tax receipts tied to investment earnings, McCaw projects the reserve — which currently represents 13% of annual operating expenses — would grow beyond $2.9 billion after the next fiscal year ends in mid-2021.

The recommended level is 15% of annual operating costs, which is roughly $3 billion.

“Our successful efforts have resonated on Main Street,” Lamont said in his budget address. “Our budget provided predictability to those counting on it most; I have heard from school principals, city and town leaders, small businesses and families – all saying – “finally, we can now plan for our future.”

Just two years ago, Connecticut had almost no reserves, was still paying off its operating debt from the last recession, and had concluded three consecutive fiscal years in deficit.

“Three years ago, credit rating agencies downgraded our state with headlines like The Wall Street Journal that asked ‘What’s the matter with Connecticut?’” the governor said. “Today, The Wall Street Journal has changed its tone. “‘The state has dug a deep hole–maybe it has now stopped digging.’”

An equally important focus of the new budget, McCaw said, is to grow the state’s economy.

The plan reinvigorates the Office of Workforce Competitiveness to create a unified, statewide strategy for training and developing new workers. The budget adds about $700,000 for new staffing.

The governor also kept a pledge to establish a new “earn-as-you-grow” tax credit for businesses seeking to add jobs. Companies adding at least 25 new full-time jobs over two years, with income at or above 85% of median household income, would receive a break. The program would be capped, meaning Connecticut would not provide more than $40 million in annual tax relief.

McCaw noted that the plan makes no cuts to social services nor to health care providers. But it also lacks any additional operating funds for the community-based nonprofits that provide the bulk of Connecticut’s social services.

Since 2002, state spending for nonprofits has grown by about 10%. After adjusting for inflation, nonprofits say they have lost money.

The CT Community Nonprofit Alliance projects it would take an extra $462 million per year to make them whole. They recently asked the governor and legislature to gradually increase funding over the next five years for an average of about $92.4 million extra per year.

Though Lamont has said he will support legalization of recreational marijuana use and taxation of cannabis sales, the new budget does not assume any revenue from this initiative.

The governor proposes that no sales occur before July 2022. In the interim, the Department of Consumer Protection and the state’s Equity Commission would study the challenges of legalization and make recommendations for implementation to the 2021 General Assembly.

Other components of the governor’s new budget include:

A “clean slate initiative” that would automatically clear certain Class C and D misdemeanors and certain drug convictions after a waiting period of seven years.

New restrictions on debt-free community college. A means test would be instituted to weed out students with sufficient resources. The program also would be limited to students who enroll full-time in courses within one year of graduating from high school.

$75,000 for new clerical support for the Connecticut Retirement Security Authority. The funding would also allow Lembo to assume operational control of the struggling agency charged with overseeing a new state-run retirement savings program for private-sector workers.

Allowing candidates who receive public grants to run for state office to use a portion of those grants to cover child care services.

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Comings & Goings: Papyrus Closing Image
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