(Updated 6:26 p.m.) Last month the governor’s budget office projected a $388.5 million budget deficit, but projections released Monday by state Comptroller Nancy Wyman forecast a deficit almost twice that size.
In her monthly letter to Republican Gov. M. Jodi Rell, Wyman pegged the state budget deficit at $624 million. She said this is mainly due to the continued weak income tax receipts.
“Although I see a slight improvement in revenues occurring toward the end of the fiscal year, my projection takes into account the accelerating job losses, high unemployment and decline in personal income that Connecticut residents are seeing now and can expect to see in the near future,” Wyman said in a press release.
In this letter Wyman also told Rell that she doesn’t believe the state will be able to reduce the state’s sales tax by a half percent on Jan. 1 because total revenue for the year is down by $407.6 million. That is more than double the revenue drop that would trigger the cancellation of a planned reduction in the sales tax.
“I wish I had better news about the revenues and the implications for a sales tax cut,” Wyman said, “but my projection is based on actual tax collections and underlying economic trends that cannot be ignored.”
Aside from the revenue shortfall the state is also spending $212.5 million more than it has budgeted, which also figured into Wyman’s deficit estimate.
The governor, who let the budget go into effect without her signature, and lawmakers in both parties used the news of the deficit projections to put their own spin on the situation.
“The Legislature’s budget contained numerous structural deficiencies that have begun revealing themselves in the analyses from both OPM and the Comptroller,” Rell said in an emailed statement.
“It is significant and troubling to have such high deficit estimates so early in the fiscal year – which again points to the need for prompt action,” Rell said. “While we may disagree on the specific estimates, we should all agree that we cannot wait for the regular Legislative session to take remedial measures.”
Rell announced last month, even before Wyman certified the deficit, that she has been working on a deficit mitigation plan to present to the legislature. Rell is required to submit a plan to the legislature when the deficit is greater than one percent of the general fund, but she has the power to reduce agency budgets by five percent without legislative approval.
“I am also prepared to exercise my authority to begin making rescissions perhaps as early as this week.,” Rell added. Rell’s statement did not address the possibility that a sales tax reduction may be off the table.
“What will it take to convince legislative leaders that continued spending at the state level threatens to make Connecticut insolvent?’’ House Minority Leader Lawrence Cafero Jr.,R-Norwalk, said.
The legislature must be prepared to act starting later this month in a special session, Cafero said. He blamed the Democrats for their inability to take significant steps to mitigate the budget deficit beginning in the spring of 2008. He said neglecting the problem drove the deficit higher on a monthly basis.
“Republican leaders again stand ready, willing and able to work with Democrats to finally do the difficult, but necessary work to reduce the size and cost of state government,” Senate Minority Leader John McKinney, R-Southport, said. ” We need the Democrat majority to stop ignoring reality and join us at the table.”
In a phone interview Monday evening, McKinney said the legislature needs to use the only tools it has left, which is spending less. He said Democrats need to own up to their mistakes and make the spending cuts they failed to make for more than a year.
While Republican lawmakers and the governor blame the legislature’s Democratic majority for the budget deficit, Democratic lawmakers blame the governor for not cutting enough.
“Connecticut is getting hit with a powerful one-two punch right now,” Sen Majority Leader Martin Looney, D-New Haven, said in a statement.“Not only do revenues continue to drop, but the governor is failing to make the spending cuts called for in the budget.”
“As the Comptroller states, about one third of the deficit is due to increased spending in the executive branch,” Looney pointed out. “It is critical that the governor not only follow through on cuts included in the budget, but also begin responsibly exercising her rescission authority.”
House Speaker Chris Donovan, D-Meriden, maintained a fairly optimistic tone after learning about the state’s deficit Monday.
“The Governor has not achieved tens of millions of dollars in anticipated state spending cuts from the Executive branch—in middle management and layers of bureaucracy, as well as a reduction in managed care rates which the Comptroller cites,” Donovan said in an emailed statement. “At the same time, revenue projections and the strength of the recovery that some economists see are highly unpredictable this early in the year.”