2015 Budget Deficit Grows – Fasano Says Increase is Staggering and Unacceptable [CT News Junkie]

March 23, 2015

Article as it appeared on CT News Junkie

While lawmakers figure out how to deal with a two-year budget that’s over the constitutional spending cap, Gov. Dannel P. Malloy’s budget director reminded them Friday that this year’s budget is running a $138.2 million deficit.

In his monthly letter to state Comptroller Kevin Lembo, Malloy budget director Ben Barnes wrote that the he’s increasing the fiscal year 2015 budget deficit by $71.6 million from last month because the federal government denied its Medicaid claims from the first quarter of 2014.

The Centers for Medicare and Medicaid Services denied Connecticut’s request to fully fund part of the Medicaid expansion population, which will cost the state about $45 million in medical claims that were paid in anticipation of reimbursement from the federal government. The state has been fighting with President Barack Obama’s administration over the money since last summer. They received a partial payment in October.

“Options for appeal are currently being explored,” Barnes wrote.

Barnes also lowered the amount of money the state will collect from the health provider tax by $18 million bringing the total revenue loss up to $63 million.

The budget deficit projections come after two rounds of rescissions.The first was $54.6 million in November and the second was $31.5 million in January.

“We continue to work to address the remaining deficit through administrative actions, including heightened scrutiny of position refills and contract requests in order to ensure that year-end expenditures are limited to those that are critical for state operations,’’ Barnes wrote.

Republican Senate Leader Len Fasano said increase in the deficit is “staggering and unacceptable.”

Fasano, who has been offering to help convene a special legislative session to help resolve the deficit, said “the governor is not paying attention and he is refusing to work on the problems Connecticut is facing. This leaves us with very few options, none of which are in the best interest of the state.”

Lembo will certify the budget estimates on April 1, but things could get better or worse after final tax collections are tallied on April 15.

Barnes’ forecast anticipates “robust Personal Income Tax collections in April…The forecast assumes 25 percent growth in Personal Income Tax receipts over last year; each percentage point deviation from the forecast equates to approximately $13 million.”

In his March letter to Malloy, Lembo said he disagrees with the rosy personal income tax collections.

“An increase of this scope has not occurred in the last decade,” Lembo told Malloy in March.

Lembo said estimated income tax payments through January have grown 4.9 percent over last year and in the past these payments have provided an indication of the growth that can be expected in April.

Lembo reduced his income tax estimates by $40 million earlier this month.

“I am also concerned that since the stock market recovery began in 2009, trading volume that generates taxable receipts has been declining. It appears that one cause is an aging demographic that has shifted to lower-risk portfolios with less trading volume,” Lembo wrote. “Complicating matters further, volume has been heaviest at lower points in the market cycle, thus reducing the amount of taxable capital gains. For these reasons, I have reduced my income tax estimate by $40 million this month. I remain hopeful that April receipts will outpace my current projection, but I believe it is reasonable to lower expectations at this time.”