With fuel taxes down, state deficit up [CT Post]

January 16, 2015

CT Post

HARTFORD — Connecticut’s lingering budget deficit nearly doubled over the last month amid a fuel-tax slump.

The state reported a monthly drop of $39.3 million in fuel taxes. Added to the $31.6 million deficit reported last month by Comptroller Kevin Lembo, the deficit has now ballooned to $70.9 million.

Minority Republicans on Thursday blamed the deficit on a poor December holiday sales season, but state officials indicated Thursday night that the new flow of red ink is entirely the result of falling gas prices and decreasing tax revenue from sales at the pump and gross-receipts levies on oil companies.

Gov. Dannel P. Malloy’s administration on Thursday night said the deficit will be dealt with in the short term and in the governor’s proposal for a new two-year budget that he unveils on Feb. 18.

But Senate Minority Leader Len Fasano, R-North Haven, and House Minority Leader Themis Klarides, R-Derby, warned that the state’s financial position is deteriorating.

“The fact that there was no significant bump in holiday sales is indicative of the economy as a whole in Connecticut,” Fasano and Klarides said in a joint statement. “We can blame this growing hole on a lot of things. We can argue that we don’t have control of many factors at play. But that gets us nowhere. As we’ve said before, we have to be proactive about addressing our state’s fiscal crisis. It’s time the governor and legislative leaders sit down together and hold a bipartisan meeting to identify long-term solutions.”

Ben Barnes, secretary of the Office of Policy and Management, which adopted the new revenue projects along with the Legislature’s nonpartisan Office of Fiscal Analysis, said Thursday that spending reductions will balance the current budget.

In November, Malloy ordered $48 million in cuts from a projected $100 million deficit, and asked the independent Judicial and Legislative branches to make reductions in the tens of millions of dollars. The governor said he would make more reductions as needed.

Malloy’s office on Thursday declined to comment on when further cuts might be ordered in the current spending package of about $20 billion.

“The budget will be balanced,” said Devon Puglia, Malloy’s spokesman. “It’s that simple.”

“While the Consensus Revenue estimates show some deterioration in the current fiscal year — largely due to lower oil prices — we are confident we can balance the budget through reduced spending between now and June 30,” Barnes said in a statement. “The revenue estimates for the biennium will be the basis for the governor’s budget proposal.”

In a longer-term projection, drops in fuel and cigarette taxes and continued falloffs in slot machine revenue will be offset by an increase of half a billion dollars in income taxes, according to new state estimates for the two-year budget that starts July 1.

The monthly consensus revenue estimates will become the backdrop for Malloy’s budget proposal next month.

Income tax revenue currently projected to top $9.26 billion in the fiscal year that runs through June 30, is forecast to increase to $9.75 million next year. Motor fuels and oil company taxes that are projected to generate nearly $867 million this year, however, are expected to fall to $841 million next year.

Cigarette taxes that will create $354.4 million this year are expected to decrease to less than $337 million next year. Casino revenue expected to bring in $267.5 million this year will continue to shrink to $260.7 million in the first year of the next biennial budget, according to projections. Sales taxes projected to bring in $4.23 billion this year are expected to raise $4.25 billion next year.

Kevin Maloney, communications director for the Connecticut Conference of Municipalities, which represents state towns and cities in the Capitol, said the anticipated increase in income taxes next year is a good sign.

“Continued growth of the Connecticut economy and the projection for growth now and in future years of key state tax revenues should help ensure that state government can sustain and advance state aid commitments to towns and provide fiscal relief from the largest and most regressive tax — the property tax,” he said.