Senator Frantz Shares Budget Concerns

May 1, 2014

Hartford – State Senator L. Scott Frantz (R-36), Ranking Member of the General Assembly’s Finance, Revenue and Bonding Committee has many concerns about the status of Connecticut’s budget after learning of the depleted surplus announced yesterday.

“As of April 1, state officials predicted Connecticut would have a surplus of over $500 million this year. But today we now know the truth. Surplus predictions have plummeted to less than $50 million and our fiscal future looks grim,” said Senator Frantz.

Consensus revenue changes released yesterday by Connecticut’s non-partisan Office of Fiscal Analysis (OFA) and the Office of Policy and Management (OPM) have fallen dramatically, leaving the state with a projected FY2014 surplus of only $43.4 million. This is a reduction of $461.5 million from the January consensus estimates.

“The sharp decrease in the projected surplus highlights the poor planning and wishful thinking that went into the governor’s budget,” said Senator Frantz. “When it comes to fiscal planning, we have to be realistic and smart about the way we use state funds. The governor’s budget exaggerated the health of our economy, with truly egregious misrepresentations,” said Senator Frantz.

Senator Frantz also shared concerns about the depth of the deficit. “If all the gimmicks, one-time revenue sources and bonding were removed from the budget the state would see an even more overwhelming and debilitating deficit of almost $1 billion.”

The “surplus,” as reported by OPM and OFA is calculated with the inclusion of multiple budget gimmicks, including reporting gains based on $578 million in one-time revenue, $196 million in debt referral, $175 million in bonding for operating expenses, and $91 million raided from the Special Transportation Fund. If the gimmicks and bonding were removed from the equation, Connecticut would see a projected FY2014 deficit of $997 million.

“This deceptive math created an illusion of fiscal stability that was celebrated frivolously. As real numbers begin to materialize, we see the truth. Connecticut is in trouble, and the majority party’s approach to the budget was never viable,” said Senator Frantz.

In addition to the loss of revenue this year, new projections for future years show a deficit of $94 million with the enacted Fiscal Year 2015 budget. If the Democratic budget adjustments passed out of the Appropriations Committee in April move forward, that would increase the 2015 deficit to $285 million.

“It is devastating to see these numbers, yet not surprising,” said Senator Frantz.

Bad news emerged throughout the past week. On Monday, the Office of Fiscal Analysis reported that Connecticut can expect to see a $277 million shortfall in personal income revenue, 19 percent below previous projections. In addition, taxes on capital gains in 2013 will be hundreds of millions below expectations, according to the letter sent out by OPM Secretary Ben Barnes.

“We are stuck in a cycle of bad policy, where poor decisions have lasting impacts,” said Senator Frantz. “Budget predictions were so off because people refused to see the truth. Income tax collections came in shockingly low this year because I believe there are fewer taxpayers in Connecticut today. As an increasing amount of people choose to leave the state to find opportunities elsewhere, tax revenue will continue to decrease. On the other hand, many people who have stayed in Connecticut are struggling to maintain their incomes. Unemployment is high, the economy is weak and tax revenues are down.”

In 2013 Connecticut’s personal income growth rate was at its lowest level since 2009, and in 2012 Connecticut was the only state in the country to have its economy shrink. The state continues to struggle with unemployment and has still not regained the jobs that it lost since the last recession, and is 54,100 jobs still below that March 2008 target.

“Time is running out for Connecticut. We are just days away from our deadline to recognize a budget solution and our fiscal health and economic future are in jeopardy. In addition, the burdens that impact families and businesses persist. I hope that in the next few days we can work across the aisle to pass a budget that truly provides relief for the people of Connecticut and implements more responsible state spending. We cannot base our budget on wishful thinking; we must be realistic to be effective.”

Lawmakers must close the budget gap by midnight on May 7th.