Lembo Certifies Higher Deficit Than Malloy Budget Office
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.