Christine Stuart photo
Sen. John McKinney, left, Rep. Lawrence Cafero, right, Rep. Arthur O’Neill, center (Christine Stuart photo )

The legislature’s nonpartisan Office of Fiscal Analysis told lawmakers Thursday that the state could be facing billions in budget shortfalls over the next three years.

At a hearing organized by Republican lawmakers, officials from the legislature’s fiscal office estimated that the state would end the current fiscal year with a $292.6 million deficit. Gov. M. Jodi Rell’s budget office has predicted a $302 million shortfall.

The picture painted by budget officials Thursday was called “sobering” and “depressing” by lawmakers on both sides of the aisle. Officials are predicting more than a billion dollar deficit by fiscal year 2012.

Sen. Edith Prague, D-Columbia, one of two Democratic senators to attend Thursday’s forum said, “It’s very scary.” She said she hopes in November once the Wall Street and Washington issues settle down that “it won’t be as dire as this report.”

“I’m more depressed now, than when I went in,” Prague said.

Rep. Chris Perone, D-Norwalk, said it looks like every eight years the state goes into a recession. “What are we doing to head that off?”

He said in order to attack the structural budget issues health care and energy costs need to be attacked.

Stamford Mayor Dannel Malloy who was at the Legislative Office Building Thursday for another matter stopped by the hearing. He said he’s predicting the deficit is going to grow to $500 or $800 million this year. He said leaders on both sides of the aisle need to start having frank and honest discussions about how government is going to be restructured over the next three years to get us through the shortfall.

“It’s ugly,” he added.

Based on the budget numbers lawmakers were given Thursday, Sen. William Nickerson, R-Greenwich, said it looks like there’s a direct correlation between the state’s deficits and capital gains. When capital gains are down so are the state’s revenues.

“Seventy thousand people at the very top pay half the revenue, so when 70,000 people catch a cold we go into a deficit,” he said.

He said right now those 70,000 people have a cold and they’re not going to get healthy anytime soon.

John Moran, an official with the nonpartisan Office of Legislative Research, said the state is technically not in a recession because a recession is measured by job growth and Connecticut’s job growth remains positive. He said data for 2008 shows Connecticut is still experiencing job growth, while 30 other states are seeing a decline. However, “our job growth is razor thin at 0.05 percent,” he said.