Budget Deficit Grows As Revenue Drops
by Christine Stuart | Apr 30, 2012 9:01pm
(9) Comments | Commenting has expired
Posted to: State Budget
After the biggest tax increase in the state’s history and a built-in surplus, some lawmakers never expected to be dealing with another budget deficit so soon. But that’s exactly where they found themselves Monday.
State budget analysts from both Gov. Dannel P. Malloy’s Office of Policy and Management and the legislature’s nonpartisan Office of Fiscal Analysis estimated Monday that the state would end the year with a $275 million to $285 million budget deficit. Revenue, according to budget analysts, dipped about $150 million this year.
“Nothing has changed. It’s not the path less taken. It’s exactly where we were two years ago,” House Minority Leader Lawrence Cafero, R-Norwalk, said.
The deficit is large enough to require Malloy to submit a budget mitigation plan to the General Assembly and it has the administration reminding people that last year the state was facing a $3.6 billion deficit.
“While today’s drop in estimated revenue is disappointing, the fact remains that we’ve solved more than 94 percent of the budget shortfall,” Ben Barnes, secretary of the Office of Policy and Management said in a statement. “And let’s be clear about one thing: we will end the current fiscal year in the black.”
Barnes attributed the budget deficit largely to a $147 million decrease in income tax receipts.
“To put these numbers in perspective, our estimated deficit is equal to approximately 1 percent of general fund expenditures,” Barnes said. “In November of 2010, we faced a deficit that was 17 times greater. Clearly, we have made real progress in tackling the immense problems left on our doorstep long before we moved in.”
Outside his capitol office, Barnes said the administration will be asking the General Assembly to delay paying the $222 million it reserved to pay off the borrowing it did to balance the budget in 2009. In that year, the legislature borrowed close to $1 billion to balance its budget and promised to use any surplus funds in future years to pay off the borrowing. Malloy panned the move on the campaign trail.
Since the Economic Recovery Notes don’t need to be paid off immediately, Barnes said the state can take its time making the payments without injury to the state’s finances. But Barnes will need the approval of lawmakers to do it.
“This strategy will allow state government to use money saved to pay down debt early to cover the unexpected revenue shortfall, so that we won’t be forced to cut essential services for Connecticut’s most vulnerable residents,” Barnes said. “We will continue to pay down the ERNs in accordance with the required repayment schedule.”
Cafero called the proposal a “gimmick” and he reminded reporters Monday that Malloy “railed against” such gimmicks when he took office in January 2011.
“I hope Connecticut’s experience with the first two years of the Malloy administration puts to rest once and for all the idea that government can simply tax its way out of a fiscal crisis,” Sen. Minority Leader John McKinney, R-Fairfield, said in a statement.
“When you try to balance a budget on revenue alone it doesn’t work. They’re too volatile,” Cafero said.
He said the Malloy administration needs to stop talking about the problem it faced when it walked in the door and it needs to take responsibility for a budget it proposed and implemented.
“Admit that you failed and let’s go back to the drawing board,” Cafero added.
The bad budget news creates an even bigger problem for fiscal year 2013. It means that the budget Malloy proposed Feb. 8 — which included an increase in education spending — and the legislature’s Appropriations Committee budget are both out of balance.
The General Assembly and Barnes will be hustling in the last week of the legislative session to figure out how to balance and pass the 2013 budget before adjournment May 9.
Rep. Toni Walker, co-chairwoman of the Appropriations Committee, said she will be going over the various budget scenarios. She admitted there is policy “we will have to change or not enact at this time because of budgetary issues.”
The biggest of which may be the education reform proposal.
“What do we do with education?” Walker said. “That’s a $128 million new policy.”
The question about whether the General Assembly is prepared to give Malloy the power to delay the payments on the Economic Recovery Notes is an issue for legislative leadership, Walker said.
Asked if it was an easier solution to the state’s budget woes than spending cuts, Walker replied: “Simple solutions don’t always translate to something that easy.”
Tags: budget deficit, revenues, Office of Policy and Management, Office of Fiscal Analysis, Ben Barnes, Lawrence Cafero, John McKinney, Malloy, dh
(9) Comments
posted by: MPS | April 30, 2012 9:34pm
These charlatans refuse to recognize that their continued spending on items that don’t rise to the level of necessities continue to contribute to the state’s financial dilemma. At the expense of those who are saddled by additional tax liabilities, the legislature knowingly implemented a deficit busting State Earned Income Tax Credit to reward individuals who don’t even pay a damn dime in state income tax revenue. Unnecessary state employment and redundant promotional opportunities continue as if there was not a SEBAC battle only a year ago. One thing is certain: Labor got this bully and imposter elected, and Labor will show him and his cronies the way out the door.
posted by: NOW What? | April 30, 2012 9:37pm
I don’t see how this administration could NOT now institute a very strict, truly hard and fast,across-the-board hiring freeze to make up the difference. It seems to me to now be an absolute necessity.
posted by: perturbed | May 1, 2012 6:16am
Hey SteveHC/NOW What?, glad you chimed in again. This report reminded me of your famous assertion earlier in the fiscal year:
posted by: NOW What?[aka “SteveHC”] | January 26, 2012 7:37pm
“mariner” - Actually, Malloy is correct. OPM and OFA *ALWAYS* issue different projections during the course of any given fiscal year… because they’re essentially SUPPOSED to (those agencies’ official purposes, missions and methods of operation were DELIBERATELY DESIGNED/intended to be different) - to help make sure that the State doesn’t ever ACTUALLY end a fiscal year in the red. Their numbers NEVER really start to converge until we get closer to the end of each fiscal year, because the data that each agency is supposed to use in its calculations is considerably different. It’s *always* the minority political party (which always knows the truth of this situation) and the news media (which does NOT know of these technical yet important differences between these two agencies) that cause all of the commotion and confusion during the course of each fiscal year.
So RELAX. The FY will end BALANCED and WITHOUT any need for additional taxes or fees, with ONLY additional spending cuts if necessary to accomplish it.
From Davos Malloy Defends Budget, Says OFA Is ‘Wrong’
Of course, another simpler, more intuitively direct explanation is that OFA was trying to be as accurate as possible, and that Malloy and his henchmen at OPM were lying. Now, as the end of the fiscal year approaches, the liars can’t hide the truth forever, and sooner or later they have to admit reality.
Is that what you really meant by “convergence?”
(Always worth a chuckle, SteveHC…)
—perturbed
posted by: CTisFUBAR | May 1, 2012 6:32am
Need a job? The State has plenty: http://das.ct.gov/fp1.aspx?page=104
posted by: Noteworthy | May 1, 2012 6:58am
What a sad predictable and repetitive financial mess and the solution according to Malloy’s money men is smoke and mirrors. Pathetic. Malloy said our financial crisis was behind us, that he had solved the problem by taking billions from our family budgets and struggling companies. In the end, it was nothing but political rhetoric and empty promises. To think he wants us to trust him on education reform, that his ideas are worth banking on were always somewhat suspect. Now they really are.
posted by: Reasonable | May 1, 2012 11:08am
The insanity of Gov. Malloy continues in giving huge raises to Connecticut State Police brass, when he started out his budget-cut acting show, by laying off State Police to save money.
Gov. Malloy should have been given a sanity test, before he took his oath of office. Or, “did Malloy lose his marbles since he took his oath of office?”
posted by: johnnyb | May 1, 2012 4:15pm
The Democrats are falling all overthemselves to vote for Malloy’s proposals. Where is the money to operate the Busway going to come from once it is open? They have not cut spending and the lack of existence of the “built in surplus” as we come to the end of the fiscal year is proof of that. The Malloy solution is to use the credit card. I can’t vote for the Democrats at the State level anymore. Their inability to stop taxing us to death and killing employers small and large is the dealbreaker.
posted by: Reasonable | May 1, 2012 8:31pm
We have all been taken by an imposter using our Governor’s chair—until he is finally voted out of office.
posted by: ASTANVET | May 3, 2012 9:25am
I don’t want to break out Maslow’s hierarchy of needs – but maybe we should have some restraint, and necessity to government spending. Those businesses, towns, or organizations that cannot survive without State assistance really need to look at their own financial model. There are people who are truly in need of state assistance, but certainly we have seen the effects of people who receive benefits who don’t need them. If we are to believe the CGA and the Governor’s office we can tax our way out of it. But that seems to be failing every time. Why is that? We keep taxing and our revenues keep dropping… and yet we keep right on spending.
I wish we could have an adult conversation about the collection of taxes and what they are used for.