Revenue On Downward Trajectory
As tax refunds continue to increase, this year’s budget continues to plunge into the red, according to Gov. Dannel P. Malloy’s Budget Director Ben Barnes.
In his monthly report to the comptroller, Barnes estimated that the state will end the year with a $62.6 million deficit under the conversion to Generally Accepted Accounting Principles. On a modified cash basis of accounting the state would end the year with a $12.4 million surplus.
Since last month Barnes’ budget projections were downgraded to reflect a $23.5 million dip in revenue attributed mostly to the increase in tax refunds.
Personal income tax is up $50 million, due to strong collections and enforcement activity, Barnes wrote in this letter. But the “largest negative change is in the Refunds of Taxes category with the expectation that the state will issue $50 million more in Personal Income Tax Refunds this fiscal year.”
With the fiscal year coming to a close in three months, the accuracy of the budget projections will come into sharper focus after April 15.
“The performance of income tax collections during the April filing period, currently projected at $1.3 billion, will be the most significant factor affecting year-end results,” Barnes wrote.
While there‘s little they can control on the revenue side of the ledger, Barnes and the administration remains confident about its spending projections.
“Overall, expenditures are estimated at $49.7 million below appropriated levels, unchanged from last month’s estimate,” Barnes wrote.
The numbers prompted Republican lawmakers to call on Malloy again to produce a deficit reduction plan.
“Despite acknowledging declining overall revenues, the governor has made no changes to the spending side of his ledger. We are moving in the wrong direction,” Sen. Minority Leader John McKinney, R-Fairfield, said Tuesday.
“The current fiscal year ends in three months. It is past time for Governor Malloy to produce a responsible plan to balance his budget,” he added.
McKinney suggested the General Assembly should also shift its attention to solving this problem before its May 9 adjournment.
“We are running out of time and options. The longer we wait to act, the more difficult the task becomes,” he said.
The legislature’s Office of Fiscal Analysis is due out with their budget report on March 25.
Their last report estimated the deficit at $161 million, and state Comptroller Kevin Lembo whose budget projections had mostly been in line with the Malloy administration reported his first deficit of the year earlier this month.
On March 1, Lembo pegged the deficit under Generally Accepted Accounting Principles at $95.7 million. Under the current modified cash basis of accounting the deficit is around $20.7 million.
At the time, Lembo said his number differs from the administration’s because he believes the Earned Income Tax Credit is generating refunds about 20 percent above budget projections and estimates it will exceed expectations by $22 million.
While Barnes never directly attributes the decrease in revenue to the Earned Income Tax Credit he estimates tax refunds will increase $23.5 million.