Budget Deficit on Track to Hit $1.1 Billion

Since I last wrote about the state budget several weeks ago, the situation appears to have continued to deteriorate. After the recent election, the Governor’s budget office announced that the deficit is actually hundreds of millions of dollars higher and stands to surpass the $1 billion mark in the years ahead.

On Wednesday, November 14th, the Governor’s Office of Policy and Management (OPM) announced that the deficit was projected to reach $365 million during the current fiscal year because of higher than expected Medicaid expenses and declining revenues. While this is an alarming development, the budget office also projected that the deficit would grow even further to $1.1 billion during the next fiscal year beginning July 1, 2013.

Under previous law, the Governor’s budget office was required to submit this report on October 15th. However, on the final day of last year’s legislative session, the Democrats voted to move the reporting date to November 10th, which conveniently fell after the recent elections. While supporters of the change claim that the move would provide a more accurate projection, it is clear that the change also effectively delayed notifying the public of the poor state of the budget until after the election.

At the time, the Governor took steps to merge and consolidate state government. However, his budget also increased spending by $857 million in the first year and $1.16 billion in the second year. It also included the largest tax increase in state history of $3.9 billion over the two year period. This whopping figure included about 77 different taxes, including the income tax, sales tax, estate tax, hotel tax, luxury goods tax, corporate tax and many more.

One of the efforts to find savings included consolidating state agencies, which led to a reduction of 22 agencies and eliminating nearly 70 positions. Some of these mergers included the formation of the new Department of Energy and Environmental Protection, the Board of Regents for Higher Education and nine separate watchdog agencies into the Office of Government Accountability. These mergers were intended to make the best use of staff, eliminate redundancies and cross-train staff to perform functions across the organizations.

For example, one such merger was formed when the Connecticut State University System, the community colleges, Charter Oak State College and the Department of Higher Education were incorporated into the new Board of Regents for Higher Education. In July, it was found that the merger saved about $5.5 million and eliminated 24 administrative jobs. However, this was announced prior to the controversy that led to the resignation of several high-ranking officials who approved unauthorized raises for 22 staff members.

Where will additional savings be found? How will next year’s budget be developed? In Connecticut, the state legislature meets every year, but the budget is developed for the biennium, or two year period. The last time the budget was developed and passed into law was 2011. Now that the elections are over, legislators will be sworn into office on the first day of the new legislative session on January 9th and new budget negotiations will begin once again.

While the General Assembly will likely come together for a special session sometime next month to vote on a deficit mitigation plan, the next budget will be thoroughly debated and considered in the upcoming legislative session in January. More recently, I received a letter from Governor Malloy stating that “we [will] address our current shortfall. And rest assured: it will be addressed, and it will be closed – without raising taxes.” My intent is to hold him to his word with my vote. While there is much speculation, we will get our first look at these future priorities during the State of the State address in February.