CT News Junkie | Lembo Certifies Higher Deficit Than Malloy Budget Office

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Lembo Certifies Higher Deficit Than Malloy Budget Office

by | Dec 3, 2012 12:37pm
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Posted to: State Budget

CTNJ file photo

State Comptroller Kevin Lembo

It’s worse than initially thought. The state is running a deficit of at least $415 million, according to state Comptroller Kevin Lembo.

As required by state law, Lembo called upon Gov. Dannel P. Malloy to offer a deficit mitigation plan to the General Assembly within the next 30 days because the deficit he certified Monday exceeded 1 percent of general fund appropriations. Malloy’s budget office has discretion to close whatever budget deficit it sees fit, even if it’s lower than the one Lembo certified Monday.

Budget Secretary Ben Barnes announced last week that the governor will reduce spending by $123 million, leaving $242 million that will need to be addressed by the General Assembly. The General Assembly is anticipating reconvening a lame duck session the week of Dec. 17.

Last month, Barnes estimated that the state would end the year with a $365 million deficit without corrective action, but the deficit Lembo certified is $50 million higher.

“We disagree with the number the Comptroller is using today,” Roy Occhiogrosso, Malloy’s senior adviser, said Monday. “However, the Governor, Comptroller, and it seems legislators all agree there is a current year shortfall that needs to be addressed before the end of the calendar year.”

The difference in the deficit numbers is attributed entirely to higher spending projections.

“Statewide agency appropriations projected to year end are running above their appropriated levels even after consideration of OPM’s [Office of Policy and Management’s] estimated deficiency appropriations,” Lembo said Monday. “Medicaid — the largest single gross appropriation line-item in the budget — is significantly above the budget target.”

Barnes previously estimated that Medicaid would exceed its spending expectations by $260 million. Lembo believes the number is closer to $320 million.

The fiscal year 2013 budget relied upon more than $100 million in Medicaid savings, “many of which have not been implemented to date, while caseload growth continues in the low-income adult program area with the addition of more than 4,000 clients since the start of the fiscal year,” Lembo said.

Additional budget risk factors include the state’s unreimbursed costs from Hurricane Sandy, Lembo said. The state has asked the federal government for at least $3.5 billion in storm relief.

But it’s more than a hurricane that is plunging the budget into the red.

Revenue is $128 million below expectations. Lembo reports that taxes are off by about $133 million, and tax refunds are up $100 million over projections.

But even more troublesome for Lembo and other elected officials is the national economic recovery.

“The slow pace of the national economic recovery is impeding the state’s ability to bring the budget into balance,” Lembo wrote in his monthly letter to Malloy. “Economic indicators are below the levels normally observed at this stage of a recovery.”

The plunge into red ink drew criticism of the Malloy administration from Republican Party Chairman Jerry Labriola Jr.

“With the current fiscal year deficit at $415 million and climbing and next year’s deficit projected at more than $1 billion, it is clear that the economic policies of Governor Malloy have been an utter failure,” Labriola said in a statement. “Our state ranks last in job growth, has the worst credit rating in the country and the worst business climate in the nation, but leads the nation in new taxes and state per-capita spending over the past two years.”

But Barnes pointed out last week that Connecticut’s debt burden when adjusted for its high personal income ranked 23rd in 2010. Most of it, or 35 percent, is related to local school construction.

The Malloy administration also is quick to point out it inherited a $3.7 billion deficit when it took office two years ago after 16 years of Republican governors.

“The fact is that Governor Malloy can’t handle the truth any better than he has handled the state’s finances,” Labriola said.

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(5) Archived Comments

posted by: DrHunterSThompson | December 3, 2012  1:06pm

That its higher now should be no surprise, it will most likely be higher the next certification as well.

Towns and taxpayers, tenants and businesses, all need to get ready.  Reducing grants to municipalities is the responsible play.

HST

posted by: Noteworthy | December 3, 2012  1:50pm

The Big O’s response from the governor is as predictable as the rising tide of deficit spending. That office is incapable of seeing reality and much prefers the fairy land of make-believe and Magic Math.

In less than 6 weeks, deficits have climbed from $60 million to $365 million to $415 million. It is likely to go higher. When revenues are overstated, and expenditures intentionally understate, it comes full circle sooner or later. Looks like Malloy is ready for Washington.

posted by: perturbed | December 3, 2012  9:22pm

perturbed

Well, if Dannel, Roy and Ben are sitting around scratching their heads wondering what they can cut next, I have a suggestion for them: corporate welfare.

According to a new database created by the New York Times, Connecticut spends at least $860 Million each year on what they’re calling “incentive programs.”

Here’s a sampling of the top 10 handouts initiated under Malloy (which doesn’t include many 7- and 8-figure gifts that have continued into Malloy’s term, but were started earlier):

$71.0 million   CIGNA Corporation (2011)
$51.0 million   Alexion Pharmaceuticals (2012)
$43.9 million   Disney (2011)
$27.5 million   DOLLAR TIME INC. (2012)
$24.0 million   CareCentrix (2012)
$7.75 million   TicketNetwork (2011)
$6.35 million   Remote Broadcasting, Inc. (2011)
$5.42 million   AWTY Productions (2011)
$4.50 million   Lock and Key Productions (2011)
$1.60 million   Kevin Productions, Inc. (2011)

According to the accompanying article (As Companies Seek Tax Deals, Governments Pay High Price), the true costs paid by governments across the country are difficult to identify. (Unfortunately, the NYT apparently missed the $80 Million given to the hedge fund Bridgewater Associates, as one glaring example.)

The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.

“How can you even talk about rationalizing what you’re doing when you don’t even know what you’re doing?” said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

And that, in my estimation, sums up the Malloy administration’s dilemma in general.

So who will be forced to bear the cost of brutal budget cuts in this next round, all so the “next five” hedge fund managers can reap their tens of millions of dollars in government handouts?

—perturbed

posted by: christopherschaefer | December 4, 2012  7:39am

Connecticut Republican Party Chairman Jerry Labriola, Jr. released the following statement today [Dec. 3] regarding State Comptroller Kevin Lembo’s most recent budget deficit estimates.
“Democrat State Comptroller Kevin Lembo’s most recent state budget deficit projection is but the latest evidence of Governor Malloy’s gross mismanagement of Connecticut’s finances and state government.
“With the current fiscal year deficit at $415 million and climbing and next year’s deficit projected at more than $1 billion dollars, it is clear that the economic policies of Governor Malloy have been an utter failure. Our state ranks last in job growth, has the worst credit rating in the country and the worst business climate in the nation, but leads the nation in new taxes and state per capita spending over the past two years.
“The policies of our big taxing, big spending Governor have been a runaway train and after two years of one-party Democrat rule in Hartford, Connecticut residents are left to survey the wreckage—while Malloy and his underlings desperately try to deflect the blame, pointing to ‘16 years of Republican governors.’ Yet those Republican administrations delivered budget SURPLUSES in 14 out of 16 of those years – despite having to deal with Democratic super-majorities in the State House and Senate—and Connecticut’s all-time employment high was reached during the summer of 2008.
“But the facts have never been part of Malloy’s revisionist narrative and the politics and policies of Dan Malloy are deceptive, disingenuous and wrong. The facts are not on the Governor’s side, so he is left to dissemble and deceive. The fact is that Governor Malloy can’t handle the truth any better than he has handled the State’s finances.”

posted by: Noteworthy | December 4, 2012  9:05am

The NY Times piece is extraordinary investigative reporting and looks at the use of incentives across the country and the great cost it imposes on communities. Aside from that, the EITC at a cost of $125 million needs to be added to the list of programs that should get the axe. It was not asked for, not needed and only eliminated a whole group of taxpayers, not paying any income tax, now not even contributing small amounts of sales tax either. I know it was a pet program of Martin Looney but it really was a very poor idea at a time of extreme budget pressure. This was not smart. In fact, there is nothing smart about this whole budget, not after these huge tax increases and shared pain.