(Updated 4:23 p.m.) In her monthly letter to Republican Gov. M. Jodi Rell, state Comptroller Nancy Wyman stopped short of announcing that the state budget—passed less than a month ago—was in deficit.
However, she did raise many concerns and pointed out weaknesses in the current budget, which the legislature plans on finalizing tomorrow in special session.
“While I understand the tendency to avoid quantifying a General Fund budget deficit amount at this early stage of the fiscal year, certain risk factors that increase the likelihood of a deficit arising during the fiscal year should be quantified as discussed below,” Wyman, a Democrat, wrote in this letter.
In the letter Wyman warned that if first quarter trends continue even after the revenue increases in the budget are enacted, then “the revenue shortfall in the General Fund would exceed half a billion dollars.”
She said both income and sales tax revenues are down.
“Collections through the third week in September show the income tax down almost 15 percent from last year,” Wyman wrote. And sales tax receipts through September are more than 10 percent below last year’s level.
Wyman expressed concern about these two taxes because combined they contribute about three quarters of the state’s General Fund revenue.
“Therefore, weakness in these two tax categories can quickly create a significant budget deficit,” Wyman wrote.
Wyman questioned the $473.3 million in “largely unspecified savings,” in the two year $37.6 billion state budget. “While the savings target is specified, the policy changes required to produce that level of savings are, for the most part, not addressed,” she wrote.
If Wyman certifies a deficit next month equal to or greater than 1 percent of the general fund then the governor will have to come up with a deficit mitigation plan to present to the legislature. This year the Democrat-controlled legislature debated no less than five deficit mitigation plans. Some but not all of the cuts proposed by Rell were adopted.
“The Comptroller’s letter raises legitimate concerns, about revenues and savings. We remain hopeful that revenues will stabilize – the millionaire’s tax and other measures included in the budget are sure to help,” Senate President Donald Williams, D-Brooklyn, said Thursday.
Senate Minority Leader John McKinney, R-Southport, said it’s “mindboggling” that Williams would make such a statement since Wyman’s letter says that even with the revenue enhancements enacted by the legislature it looks like the state will be running a $500 million deficit.
He said he agrees with the Comptroller that the sooner the legislature returns to mitigate any budget deficit, the better.
“If first quarter trends continue unabated, even after fully incorporating the projected revenue gains enacted as part of the budget, the revenue shortfall in the General Fund would exceed half a billion dollars,” Wyman said in the Oct. 1 letter. “Because it is early in the fiscal year, there is sufficient time for a reversal in the trend to mitigate the shortfall.”
“Democrats refused to engage in serious deficit mitigation efforts in 2009,” McKinney said. “If we don’t act by January the state will be giving up most of the fiscal year making it harder to cut funding that state agencies have relied on.”
Democratic lawmakers are taking more of a wait and see approach to the deficit.
Williams said if Rell tightens her belt and cuts executive branch spending the state will benefit.
“It is imperative that the hundreds of millions of dollars of spending reductions included in the budget are realized,” Williams said. “In order for this to happen, the Rell administration must continue to tighten its belt and cut the size of bureaucracy in the executive branch. Falling short is unacceptable.”