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State Budget Still In The Red

by | Jan 4, 2010 4:12pm
() Comments | Commenting has expired
Posted to: State Budget

State Comptroller Nancy Wyman’s latest assessment of the budget found that state government remains $500 million in deficit, which is still an estimated $200 million more than predicted by Republican Gov. M. Jodi Rell’s budget office.

In her monthly letter to Rell, Wyman, a Democrat, predicted that Connecticut will end 2010 with a budget deficit of $513.3 million—a modest improvement over last month.

The $36.2 million improvement in the deficit was due to a net increase in revenues of $9.4 million and net spending reductions of $26.8 million, Wyman said. Most of the revenue improvement is related to the sale of unclaimed state property that brought in $58.4 million.

However, income tax collections are still down.  According to Wyman the income tax, the state’s single-largest source of revenue, will yield under $6.4 billion this year, or $212 million less than originally projected. 

The downward trend is driven by the loss of more than 88,000 jobs in Connecticut since the recession began in March 2008 and the increase in the tax on Connecticut’s wealthiest citizens is not helping to increase revenues.

“The revenue gain associated with the income tax rate increase is just sufficient to offset the negative trending in income tax collections, which leaves my estimate close to the Fiscal Year 2009 receipt level,” Wyman wrote in her letter to Rell. “Sales tax receipts are expected to be more than 6 percent off of last year’s collections.”

“Until the state stops losing jobs and the payroll taxes that go with them, this deficit will continue to present difficult challenges for policymakers,” Wyman said in a press release.

But Wyman also warned that the state can’t blame all its problems on the global economic crisis.

“While the economic downturn exacerbated the budget imbalance, the state was facing deficits even in the absence of a recession,“ Wyman wrote. “Any meaningful deficit reduction plan must focus on permanently realigning revenues and expenditures, and it must ensure that any future revenue windfalls are not used for ongoing spending initiatives that cannot be sustained in the long term.”

Last month Rell vetoed the Democrat-controlled legislature’s attempt to mitigate the budget deficit by delaying the reduction in the estate tax and cutting spending by $12.4 million. When Rell vetoed the measure she said the legislature only nibbled away at the problem instead of addressing it.

If the legislature had adopted Rell’s mitigation plan the deficit would have been “largely mitigated,” Wyman said. And if Rell had approved the legislature’s plan it would have provided about $115.9 million in deficit relief to the state.

Meanwhile, Wyman raised concerns about the projected overspending on social services.

The state agency running largest deficiency is the Department of Social Services, Wyman wrote in her letter to Rell. The deficiency is tied to the department’s “inability to implement budgetary cost saving measures within the budget’s estimated time frame,” Wyman wrote. “One such measure is a reduction in managed care rates, which was a cost savings that you included in your own budget proposal.“

Rell’s budget office along with the Department of Social Services have said they are currently in the middle of negotiating with the three managed care providers to find the $50 million in savings. Since the negotiations are ongoing no one was able to comment on if any progress has been made.

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Comments

(3) Archived Comments

posted by: jman45 | January 4, 2010  6:51pm

Hey Christine, great article! This budget mess is really getting old. Anyways, I saw this new blog at www.ctyanks.blogspot.com. Not sure if its legit but you might want to check it out. Thanks for the great reporting!

posted by: Amazed | January 4, 2010  11:06pm

So it seems at least one of the Dems FINALLY gets the idea that you need to tighten the belt and make some cuts before budgets get balanced.

“If the legislature had adopted Rell’s mitigation plan the deficit would have been “largely mitigated,” Wyman said. “

Maybe she can talk to the majority party in the legislature and pass along the basic info we have all known for years- spending more than you make will put you in the poor house.

posted by: CT Jim | January 5, 2010  10:05am

Yeah it would have been mitigated but not balanced.
The governors agencys which she heads continue to over spend at astonishing rates.
most of this can be attributed to 120 day wonders and the high salaries of her appointees which she refuses to cut.
A mitigation plan will not take care of the structural problems with our tax system and the governors lazee’fare Reaganesqe way to handle it have made the situation worse and not better, if you READ the WHOLE article the comptroller states the state was in this mess with or without the recession.
So it was nice to read that the comptroller addresses both sides but as has always been the problem with republicans both in state and nationally they take a 300 word document take out 10 words that favor them and ask Frank Luntz how to achieve political gains from them as real people are suffering.
This is a sad state of affairs which is the major reason that people in CT are sad, depressed and generally unhappy.