Barnes Confirms $365M Deficit
(Updated 5:05 p.m.) Gov. Dannel P. Malloy’s budget director confirmed on Tuesday that the budget deficit has swelled to $365 million. That’s six times the size of the deficit state Comptroller Kevin Lembo certified on Nov. 1 .
In his monthly report to Lembo, Barnes said the increase in the deficit is due to a “combination of weaker revenue collections and an increase in estimated expenditure requirements, most notably for the Medicaid program.”
Revenues are down about $144.9 million from last month. Most of that is from tax refunds, which have been revised downward by $100 million.
“October was a particularly heavy refund month for both income taxes and corporation taxes,” Barnes said in his letter to Lembo. The tax refunds were made by filers who had received extensions.
The corporation tax has been revised downward by about $51.8 million to “reflect weak collections year-to-date,” Barnes said. And sales taxes are lagging about $43.7 million continuing their downward trajectory.
On the spending side, the state is spending $294.1 million over what it has budgeted, but that‘s partially offset by $54.1 million that the administration asked state agencies not to spend this year. The $240 million in overspending is a net increase of $160 million over last month’s forecast.
Most of the overspending is attributed to the increased enrollment in the Medicaid program for low-income adults.
The Correction Department is also spending about $20 million more than it budget for this year. Barnes attributed the shortfall to overly optimistic budget assumptions. The Department of Emergency Services and Public Protection is also spending about $13 million more than budgeted.
The Department of Children and Families will spend about $30 million less than anticipated as a result of caseload reductions and the Office of Legislative Management will spend about $4.5 million less than anticipated.
Barnes said he’s working on a budget mitigation plan to submit to the General Assembly next month, after Lembo certifies that the deficit is larger than 1 percent of this year’s $19.4 billion budget.
It’s likely that the $365 million is too big for Malloy to cut on his own, so he will need the legislature’s help.
Malloy has the authority to cut 5 percent of any appropriation and 3 percent of any fund in a financial crisis without legislative approval, but to make the $365 million in cuts it’s likely he will need legislative approval. Last year, the Democrat-controlled legislature rejected his request to increase his rescission authority to 10 percent of any appropriation and 5 percent of any fund.
Republican lawmakers are anxious to help their Democratic colleagues deal with the fiscal shortfall.
“A special session dedicated to dealing with the state’s deficit of $365 million for the current fiscal year can be efficient and organized if we get Democrats and Republicans and their respective staffs to work together ahead of time,’’ House Minority Leader Lawrence Cafero, R-Norwalk, said Monday. “It need not be a protracted session with hours of debate if there is a cooperative effort ahead of time.’‘
House and Senate Democrats have already told their members to prepare for a special session the week before Christmas. No date has been set and no plans for spending cuts have been presented.