Lembo Certifies $60.1M Budget Deficit
Lagging sales tax receipts and increased Medicaid caseloads contributed to the $60.1 million deficit that state Comptroller Kevin Lembo certified Thursday.
In his monthly letter to Gov. Dannel P. Malloy, Lembo confirmed that the state is operating on a $60.1 million deficit, just four months into the fiscal year.
The numbers don’t amount to 1 percent of the state budget, which means the General Assembly isn’t going to be called back to adjust the budget, but at least one lawmaker believes that’s likely to happen after the November election.
House Minority Leader Lawrence Cafero said he could have written Lembo’s letter in May when the Democrat-controlled General Assembly decided to postpone receiving revenue estimates until mid-November.
“It’s clear to me that they agree things are not going the way they planned,” Cafero said Thursday.
Even Lembo says that the “potential” for a deficit in excess of 1 percent of general fund spending is growing.
Sales tax receipts are running behind where they where at this time last year.
“This is especially troubling in light of slower personal income growth in the state,” Lembo wrote. “Based on the second quarter 2012 results released by the Bureau of Economic Analysis, Connecticut’s personal income growth slowed from 1.4 percent in the first quarter of 2012 to 0.9 percent in the second quarter.”
Historically about 15 percent of net sales tax revenue is posted through September, “so it is somewhat premature to alter the projection this month based on the limits of the data trend,” Lembo concluded.
The state is also spending more money than it’s taking in.
Spending is expected to exceed its original target by $80 million, mostly due to Medicaid spending, which is $100 million over budget due to caseload growth, Lembo said. But the higher-than-anticipated Medicaid expenditure is partially offset by $20 million in lower debt service payments due to a favorable interest rate environment.
The numbers are the same as what Malloy’s Budget Director Ben Barnes predicted on Oct. 20, but Barnes is more optimistic about the administration’s ability to control costs.
“The continued sluggishness of the national economy and its potential impact on state revenues is chief among those challenges, and we will take necessary steps to ensure that we constrain spending to live within our means,“ Barnes said in a statement Thursday.
“To that end, we are closely monitoring revenue and expenditure trends and will recommend actions that further our efforts to bring the state’s finances into long-term balance while protecting the health and safety of our residents.”
But Cafero cautioned that the budget Malloy released last year showed the state in deficit this year and future years.
He predicted the General Assembly would be forced to do a deficit mitigation plan by January 2013.
“I knew it was going to happen,” Cafero said.