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Budget Balancing Act Will Be Tricky In 2013

by | Sep 4, 2012 5:48pm
() Comments | Commenting has expired
Posted to: State Budget

State Comptroller Kevin Lembo certified that the state officially ended 2012 with a $143.6 million deficit. That deficit was erased in June when the state moved $222 million it planned to use to pay down previous borrowing to eliminate the debt.

But his monthly letter  to Gov. Dannel P. Malloy was less about 2012 and more about what the state will have to do if it wants to end 2013 in the black.

Just two months into the new fiscal year, Lembo cautioned that the new budget anticipates that spending will increase 2.6 percent over last year and revenues are budgeted to grow at a rate of 3.1 percent over last fiscal year.

“This rate of (spending) increase is historically low and will require careful monitoring and swift remedial action if outlays trend higher,” Lembo said in a press release.

In his monthly letter to Malloy, Lembo said spending in 2012 was up $936.9 million or 5.2 percent over the previous fiscal year. The increase in spending was driven largely by the Department of Social Services where the Medicaid case loads increased 52 percent. Also teachers’ retirement payments were up $165.2 million or 11.4 percent, and funding for the state employees’ retirement rose $89.3 million or 15.9 percent.

On the revenue side, Lembo said revenues increased 4.8 percent or $854.2 million. The problem was they fell $227 million short of expectations.

“The major reason for the shortfall was the capital gains and bonus component of the income tax,” Lembo wrote. “The withholding and final payment portions of the income tax were close to budget projections rising 15.5 percent and 18.2 percent respectively.”

The income tax came in about $239.8 million below projects and federal funds declines $628 million as stimulus programs ended.

While Malloy’s administration remains confident it can live within its means, Sen. Minority Leader John McKinney isn’t so certain.

“Rather than do the work of reducing spending to balance the budget, Malloy engaged in budget gimmickry that he promised he wouldn’t,” McKinney said Tuesday.

He said he has no confidence that the Democrat-controlled General Assembly will do what’s necessary to do to balance the budget.

He said the state needs to understand with unemployment at 8.5 percent that it will need to spend more money on things such as Medicaid, but that doesn’t mean it can’t cut the budget in other places.

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Comments

(5) Archived Comments

posted by: JAM | September 4, 2012  6:52pm

3.1% seems pretty optimistic. Revenues fell short last F/Y despite a record increase in taxes, including the retroactive application of the IT increase.
By most accounts the economy could be in for rough sledding, and there doesn’t seem to be much justification for increased revenues.

posted by: eastrivertype | September 5, 2012  11:30am

Is any one else tired of the “it is a revenue problem?”  We just had a massive tax increase and it still isn’t enough.  Why do you think that some people believe that there will never be enough revenue until we address the spending side.  We have a structural deficit and waiting for the massive upturn in the economy won’t solve it.

posted by: JAM | September 5, 2012  12:18pm

@ eastrivertype:
you’re correct, but Malloy’s entire approach has been predicated on that massive upturn.
His deal with the employees leaves him no room to maneuver other than cutting aid to the cities and towns, or raising taxes again.
I think he understands his predicament which is why he’s throwing up all over himself backing Obama in the hope that BHO bails him out with a job in a new Adminisration.

posted by: oliviahuxtable | September 6, 2012  11:34am

Yes, thanks to the otherwise-awful SEBAC agreement, Dannel cannot come feeding at the state employee trough. Can anyone say tax the rich? Leave the middle class alone.

posted by: JAM | September 6, 2012  4:19pm

@oliva…
Yes tax the rich more, and then give them $100’s million in economic development funds to keep them from leaving.