$172.8M Budget Deficit Just Shy of Trigger

April 1, 2015

Article as it appeared on CT News Junkie
The 2015 state budget deficit is j
ust shy of an amount that would require Gov. Dannel P. Malloy to submit a deficit mitigation plan to the General Assembly, state Comptroller Kevin Lembo said Wednesday.

Lembo certified the state would end the fiscal year with a $172.8 million deficit, which is $3.2 million short of the one percent in total appropriations necessary to trigger a mandatory deficit mitigation. He said the deficit is $40 million greater than the Malloy administration predicted on March 20.

“Because my current estimate is so close to the mitigation trigger and only three months remain in the fiscal year, I recommend that deficit reduction planning with the legislature should proceed without delay,” Lembo wrote in his monthly letter to Malloy.

But the Malloy administration, which projected a $132.8 million deficit over a week ago, seemed unfazed.

“As we have assured CT residents, we will make the difficult but necessary decisions to keep our budget in balance,” Malloy budget director Ben Barnes said in an emailed statement.

Along with the statement, Barnes included a list of $13.7 million in budget rescissions from various state agencies.

He said the rescissions are not included in Lembo’s estimates even though they warned him they were coming.

“If it proves to be the case that we have to do deficit mitigation it will be part of the end-of-session budget negotiations,” Barnes said.
But Republican lawmakers say it may be too little, too late.

“I fear the budget reserve fund is now the only way to close this shortfall,” Senate Republican leader Len Fasano said Wednesday.
But Barnes said “the April tax receipts will determine whether further action is needed.”

However, Lembo in his previous letters to Malloy has expressed concern about what the state can expect from the April tax receipts.

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 disagreed with the rosy personal income tax collection estimate.

“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 attributed the deficit to a $106.2 million shortfall in federal grants, $49.4 million reduction in the health provider tax, and $40 million less in income tax receipts. He said the one gain the state had was a $58.8 million increase in sales tax, and a $30 million increase in the corporation tax.

Lembo also reported a $14.3 million cash shortfall in the retiree health insurance fiduciary fund. The funds holds employer, employee, and retiree health contributions and pays medical claims for eligible retirees.

The fund is outside the general fund, so it doesn’t show up in deficit and surplus projections, however, it will need to be resolved. If there was a surplus at the end of the year, Lembo said they could apply it to the shortfall, but since there’s a deficit they will need to find the money somewhere else in the budget.

He told Malloy that if his original request was included in the budget then “no cash shortfall would exist.”