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Red Ink Could Trigger Deficit Mitigation

by | Nov 20, 2017 4:13pm
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Posted to: State Budget, State Capitol

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Gov. Dannel P. Malloy

HARTFORD, CT — (Updated 5:15 p.m.) The ink is barely dry on the legislature’s bipartisan budget that was signed by Gov. Dannel P. Malloy on Oct. 31, but it’s already $202.8 million in deficit, according to the governor’s budget office.

That’s slightly larger than one percent of the general fund, which means if state Comptroller Kevin Lembo certifies the deficit number on Dec. 4 then the General Assembly may be required to come back into special session to fix it.

House Speaker Joe Aresimowicz, D-Berlin, took the news in stride Monday.

“A small projected deficit at this point is not totally unexpected, yet it is still somewhat disappointing, particularly the decline in federal funds,” Aresimowicz said.

The budget was passed four months into the new fiscal year, which was certain to cause problems.

“When you look at in terms of percentages, about 1 percent of the total budget, and consider that we are only four months into the current fiscal year, it is not an unmanageable number. If and when the governor does need to submit a mitigation plan to the legislature, we stand ready to work with the administration in the coming months to ensure the budget is balanced going forward.”

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Senate Republican President Len Fasano

Senate Republican President Len Fasano, R-North Haven, wasn’t as generous as Aresimowicz. He accused Malloy of releasing “artificially high numbers to trigger the need for a formal deficit mitigation plan” and said, “It’s disturbing that Gov. Malloy would purposefully make the state’s finances look worse than they actually are just so he can have a say in how we close the budget shortfall. That may be in his best interest, but it certainly isn’t in the state’s best interest.”

Kelly Donnelly, Malloy’s spokeswoman, said it’s “preposterous that these numbers would be intentionally inflated.” She said Malloy’s own budget staffers agree with the figures.

Senate President Martin Looney, D-New Haven, said legislative leaders who negotiated this bipartisan budget would return next week to have a conversation about how to proceed.

House Minority Leader Themis Klarides, R-Derby, said they should reconvene anyway to undo the damage Malloy did last week when he decided to cut municipal aid.

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House Minority Leader Themis Klarides

“The governor’s cuts last week were clearly intended to punish towns and cities,’’ Klarides said referring to the $91 million in reductions to municipal aid.

As part of the budget negotiated without Malloy, legislative leaders left $112 million in unspecified savings in 2018 and $151 million in 2019 for the administration to find.

“It’s becoming clearer by the day that Representative Klarides has a strong case of buyer’s remorse,” Donnelly said.

She said legislative leaders are trying to avoid ownership of the decisions they made when they voted on the budget.

“This is the budget they crafted and voted for — if they want it changed, they have the authority to come in at any time and pass a new budget,” Donnelly said.

Klarides couldn’t let the comments go.

“If anyone in the state of Connecticut has ‘buyer’s remorse it is the voters who put into office Gov. Malloy, the singular most unpopular Democratic governor in the country,” Klarides said. “Having presided over the two largest tax increases in state history that his fellow Democrats approved over the last seven years — without a single Republican vote — and the disastrous giveaways to state employee unions, (the SEBAC agreement) he now criticizes our compromise budget agreement.”

The Office of Policy and Management (OPM) said revenues have declined $227 million below the number projected in the recently approved budget.

The largest decline was in federal grants, which are down $142.1 million due largely to a final reconciliation for medical services provided during the second half of 2017.

The income tax revenue was also revised downward by $34.1 million. During the first three quarters, estimated payments fell below their targets by over six percent compared with prior years.

“This underperformance, which could be significant, has not been reflected in the consensus revenue forecast due to the expectation that more meaningful data will be available once taxpayers make their fourth estimated payment in late December or early January,” OPM Secretary Ben Barnes, said Monday in his letter to Lembo. “Over 80 percent, or $2.5 billion, remains to be collected from this revenue source.”

Sales tax was also revised downward by $69.6 million as its growth has remained below target. The largest positive change was the Inheritance and Estate Tax, which is up $30 million.

On the spending side, there are two areas the administration is watching closely.

“First, we are showing unbudgeted expenditures for adjudicated claims totaling $15 million, which are the result in part of payments and attorneys’ fees for the SEBAC v. Rowland settlement,” Barnes said. “Second, we project that staffing and contractual services required for compliance with the Juan F. consent decree will cause the Department of Children and Families to exceed available resources by approximately $10 million.”

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