Malloy administration to dip into rainy day fund to balance ledger [Rep-Am]

REPUBLICAN-AMERICAN

HARTFORD — Gov. Dannel P. Malloy proved unable to close a nagging budget shortfall, so now the rainy day fund will be tapped to balance out the state’s ledgers for the fiscal year.

After eight months, the Malloy administration quietly admitted defeat in a monthly budget report issued just before the close of business Friday. The report said this year’s $19 billion budget is projected to end $115 million in the red.

There was no initial comment from the governor’s office after the release of the June budget estimate. It is the final report before the 2015 fiscal year ends.

While the fiscal year ends June 30, the state comptroller’s office will take another month to close out the books, so shortfall could change for better or worse.

When the books are closed, any remaining shortfall will be offset by an automatic transfer from the $519.2 million rainy day fund in accordance with state law, according to Benajman Barnes, the state budget director

It will be the first time the budget reserve has been tapped since it was emptied of nearly $1.3 billion to balance the 2010 and 2011 budgets during an earlier budget crisis.

The governor’s budget office reported the June estimate reflected all the reductions that Malloy ordered and other cost-cutting measures the administration employed to manage the deficit.

The Office of Policy and Management also took into consideration $121.6 million in transfers and other appropriations that the legislature made to close the 2015 deficit. The measures are incorporated in the nearly $40.3 billion budget for the upcoming two-year budget cycle.

The administration’s announcement Friday represented a political setback for Malloy.

He had campaigned for re-election last year on turning around the state’s finances, telling voters how he had inherited a $3.6 billion deficit and then posted three straight surpluses and replenished the depleted rainy day fund.

The governor and Barnes had maintained the administration could manage the deficit since the Office of Policy and Management first reported a budget gap had opened up in November — just after Malloy’s re-election.

With three months left in the fiscal year, Malloy rejected State Comptroller’s Kevin Lembo’s recommendation that the governor and legislature should start planning how to close the budget deficit without delay.

In addition to ignoring the Democratic comptroller’s advice, Malloy and aides rejected and mocked Republican calls for bipartisan action on the deficit.

Republicans repeatedly pushed for budget cuts, arguing since November that the shortfall would only grow while opportunities to reduce spending would dwindle.

Malloy ordered three rounds of spending cuts totaling approximately $100 million. He had authority to make additional reductions using his limited authority as governor.

Republican leaders also charged the administration was underestimating the size of the deficit for months.

Back in April, Senate Minority Leader Leonard A. Fasano, R-North Haven, voiced suspicions that Malloy was planning to tap the rainy day fund to close a year-end deficit rather than cut spending to close it. At that time, the governor stated that it was too early to consider that option.

Part of this year’s budget trouble was that the income tax did not raise as much as expected. The tax on personal earnings is the largest source of state revenue.

In its June report, OPM is estimating the income tax will raise slightly more than $9.1 billion, $100.5 million less than originally budgeted, and $35.5 million less than the last joint estimate from OPM and legislature’s budget office from April 30.