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Stubborn Budget Deficit Tied To Declining Revenue

by Christine Stuart | Jan 22, 2013 3:25pm
(9) Comments | Commenting has expired
Posted to: State Budget, Taxes

CTNJ file photo

Ben Barnes

Despite the legislature’s attempt to erase the state budget deficit at the end of December, Office of Policy and Management Secretary Ben Barnes issued a report Tuesday that says the state budget is still in the red by $64.4 million. 

The red ink, largely tied to the decline in revenue, is not surprising since last week a report showed revenue down about $160 million from the budget lawmakers adopted in June.

Since last month, revenue has dropped by about $33.9 million, according to Tuesday’s report. The most significant of which is the sales tax, which dropped $116 million as “projections year to date have been growing at a slower than anticipated rate,” Barnes wrote in his monthly budget forecast.

But he said less than half of the year’s income tax revenue has been collected and April still remains the most significant month for income tax collections.

“In addition, changes in taxpayer behavior due to the federal fiscal cliff may result in potential one-time gains in those April collections,” Barnes wrote.

Rep. Vincent Candelora, R-North Branford, said the decline in sales tax revenue is a disturbing trend.

To quote former Gov. M. Jodi Rell’s budget director, Robert Genuario, “Once a trend starts it doesn’t just stop,” Candelora said.

Historically, the decline in revenue has been tied to the income tax during the economic recessions of 1990, 2003, and 2009, Candelora said. The decline in sales and corporation tax in this year’s budget represent a different type of recession and “it may speak to the tax policies implemented a year ago.”

Republican lawmakers who didn’t vote for Gov. Dannel P. Malloy’s budget two years argue the $2.6 billion in tax increases over two years stifled economic growth.

“Some of it could be consumer confidence or tax avoidance,” Candelora said, referring specifically to the increase in the sales tax implemented in 2011.

On the spending side, Candelora expressed confidence that the administration was doing everything it could to spend less than it budgeted.

The bigger problem is “it feels like the state is chasing the dollars trying to achieve savings anywhere we can possibly find them and we’re not paying enough attention to policy issues,” Candelora said. “I think every effort is being made to curb spending.”

According to the monthly budget report, spending is expected to fall $96.2 million below projections after the deficit mitigation measures are taken into account. However, several state agencies and programs are still running deficiencies.

There are $337.9 million in deficiencies across six agencies. The Medicaid program is still running the largest deficiency of about $284 million, which is up about $14 million from last month. The increase in the deficiency is attributed to the increase in caseload and high use of medical services.

The Department of Mental Health and Addiction Services is running a deficiency of about $11.3 million. The Department of Correction is running a $22 million deficiency because of personal services and overly optimistic assumptions. The Department of Emergency Management and Public Protection also was overly optimistic in its budget assumptions and is running a $13 million deficit. The Department of Consumer Protection is experiencing a $900,000 shortfall because of the restructuring of its casino staffing reimbursements, and the Comptroller’s office is expected to incur a $1.7 million deficiency in both its personal services and “other expenses” accounts.

But Barnes said those deficiencies will be offset by measures the legislative and executive branches took in December to erase most of the deficit.

He said the Department of Children and Families was able to save the state $22.9 million by reducing caseloads. The state Comptroller also was able to save about $43.7 million through favorable health care cost trends for active and retired state employees.

State Comptroller Kevin Lembo will certify the budget numbers on Friday, Feb. 1, and Gov. Dannel P. Malloy will present his two-year budget on Feb. 6. That budget will seek to close a more than $2.2 billion deficit over the next two years.

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(9) Comments

posted by: Noteworthy | January 22, 2013  5:29pm

Again and again - at what point will those who run this state finally get it? Here’s a remedial class on taxation simplified:

When you tax something, you simply add to its cost. When you add to the cost, you get less of it because consumers will feel it’s not worth it.

Case: State seriously raised the tax on cigars. I quit buying cigars in state and went out of state. CT passed Amazon Tax and out of state cigar shop tried to collect the tax - which is 30%. A box of cigars went from $100 to $130. I quit buying cigars. The same is true for bottled water. When I travel out of state, I gas up before coming home. When I go on a trip, I gas up out of state. The dog doesn’t get groomed once a month anymore, now it’s once every two months. And so on and on. Get it yet?

When you have the highest consumer tax, the highest gas tax, and you tax more and more things - you simply price CT products out of the market or consumers make a decision that regardless of where the product comes from, the tax simply pushes it into a luxury category for which we are unable or unwilling to pay. Simple.

posted by: JAM | January 22, 2013  5:42pm

So it seems raising taxes does not necessarily translate into more revenues.
This must come as a shock to the average Legislator in Hartford.
Lower taxes, a better investment climate, and more economic growth may just generate more revenue.
Too bad it’s too difficult for the Connecticut pols to understand.

posted by: fastdriver | January 22, 2013  6:37pm

NOW Dannel is playing with SENIORS’ care! Received a notice today that the Connecticut Homecare Program for Elders is facing a mandatory 5% REDUCTION, amounting to $2.37 million! My mother is 100 years old! I am doing EVERYTHING possible to keep her at home, but I have to depend on home aides to help out a few hours a day so I can have some “free” time and run errands because my mother is wheelchair bound and needs help 24/7! She cannot be left alone!

I think maybe it’s time to reassess who is receiving benefits from the state, through fraudulent means, who are VERY capable of getting some kind of a job! I KNOW there is a lot that can be saved with some THOROUGH investigations ASAP! Just look at who applied for aid after the hurricanes! Crooks! Wake up Dannel! STOP taxing businesses so much before MORE move out of CT!

posted by: DrHunterSThompson | January 22, 2013  8:00pm

In California you can raise taxes cuz it’s a loooong drive to Nevada. Raise taxes in ct and we go to ma or ri.

Simple is what simple does.

HST

posted by: ALD | January 22, 2013  9:43pm

Does this guy look like he has a clue??  Would you give him your money to invest for you??  Everytime we in CT vote these Democrats in that is exactly what we do.

posted by: christopherschaefer | January 23, 2013  8:05am

And let’s not forget that CT owes the Fed. govt. over $3 million due to CT’s fiscal mismanagement, i.e. overbilling: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/ct_overbilled_the_feds/  This confirms one of Forbes’ reasons why one should not invest in CT state or municipal bonds (or real-estate): lack of credit-worthiness. “Two factors determine whether a state makes this elite list of fiscal hellholes. The first is whether it has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector…The second element in the death spiral list is a scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios.” CT’s rating: “the most hazardous”. http://www.forbes.com/sites/baldwin/2012/11/25/do-you-live-in-a-death-spiral-state/

posted by: ConnVoter | January 23, 2013  8:53am

Oh, how Connecticut so desperately needs a Scott Walker in the Governor’s office right now.

posted by: meridenite | January 23, 2013  11:22am

No job, no pay, no income tax, sales tax, gas tax etc, etc, etc.

posted by: timelord | January 23, 2013  1:50pm

Noteworthy is absolutely correct.  This summer I made 5 long-weekend trips to Maine.  I didn’t buy one single gallon of gas for those trips in CT.  I bought gas usually $0.20/gal cheaper in Mass. and Maine.

I’m not much of a drinker, but I did buy some wine in NH.