Budget Continues To Bleed Red Ink, Year End Deficit Likely
It doesn’t include the latest tax collections, but the Office of Policy and Management estimated Friday that the state will end the year with a $141.9 million deficit, about $80 million worse than projected last month.
“It’s bad,” Office of Policy and Management Secretary Benjamin Barnes said Friday as he left the Capitol.
In his monthly letter to the state Comptroller Kevin Lembo, Barnes attributed the revenue loss to an increase in Medicaid spending and higher-than-expected tax refunds. However, the numbers released Friday don’t include the income tax collections from the April 17 tax deadline.
But based on where the budget is now, it’s not likely to erase the deficit despite the largest tax increase in the state’s history.
“Based on data through today, however, those collections are currently running at a pace insufficient to achieve our revenue target,” Barnes wrote. “Because April income tax collections have such a significant impact on year-end results, the weakness in collections to date suggested the possibility of ending the year with a significant budget deficit.”
Income tax collections were not adjusted in Barnes’ letter, but revenue was adjusted upward by about $10.9 million and tax refunds were revised downward by $70 million.
“The state is in the middle of the year’s busiest two weeks for tax collection,” Barnes said. “While early receipts are below targets, it is too soon to draw any firm conclusions about our income tax results for the year.”
Rep. Toni Walker, D-New Haven, said she personally knows a lot of people who filed extensions this year. She asked the state to figure out how many people filed for extensions and what impact that may have on final budget figures. She said there was a lot of uncertainty among her acquaintances regarding personal income this year.
At the moment, Barnes said there are no plans to offer any more executive agency recissions until after the April 30 consensus revenue estimates are compiled.
The $141.9 million deficit does not automatically require the governor to submit a deficit mitigation plan to the legislature because the deficit is still below 1 percent of the total budget.
Trying to find some positive news in the latest budget figures, Barnes said the Earned Income Tax Credit will cost about $5 million less than anticipated.
Last month, Barnes reported that the state issued $50 million more in personal income tax refunds than it had the previous fiscal year, but the accuracy of those numbers will come into sharper focus after the April collection period is tallied.
Lembo will release his budget estimated on May 1.
Earlier this month Lembo projected that the state will end the year with a $120.8 million deficit.
Lembo estimated that general fund revenue was falling $118.2 million short of original budget projections and net state spending was $49.7 million below the original budget plan.