Budget analysts told two legislative committee’s Tuesday that less than halfway through the fiscal year questions remain about Connecticut’s budget, which included the largest tax increase and closed the largest deficit in the state‘s history.
Budget analysts for Gov. Dannel P. Malloy and the General Assembly told the Appropriations and Finance, Revenue, and Bonding Committee’s that they expect to end the year with a surplus of $67 to $100 million, depending on which analyst you believe. But about $75 million of that is dedicated to the transition to Generally Accepted Accounting Principles, and the rest will be used to pay down debt.
Ultimately the size of the surplus will depend largely on income tax receipts, which aren’t due until April 15. Until that time it’s a guessing game.
And while there’s agreement on the bulk of the budget estimates , the nonpartisan Office of Fiscal Analysis, told lawmakers it’s unable to confirm some of the components of the $1.6 billion state employee concession deal.
“There is a significant lack of detail on information coming from those accounts,” Alan Calandro, director of OFA, told the committees. Some of the estimates of the $1.6 billion concession package negotiated between the unions and Malloy were put together by actuaries and OFA doesn’t have that type of expertise on staff to be able to say whether those numbers are accurate or not.
Sen. Andrew Roraback, R-Goshen, said the numbers targeted for savings in the state employee concession package are larger than the projected surplus, so it has to find $809,000 a day in savings beyond what Malloy has already held back in order to balance the budget.
But Office of Policy and Management Secretary Ben Barnes said that’s not true because it has already held back about $700 million from state agency budgets. He said the agencies have all developed internal plans to live within those savings.
The Office of Fiscal Analysis projected earlier this month that the state employees Health Enhancement Program would fall about $52 million short of the projected savings.
“I hope that we don’t have a $50 million deficiency there. We might,” Barnes said. “It’s not out of the question, but I believe we’re likely to see some offsetting under-expenditures in other areas.”
He said he has no choice but to move forward aggressively with the program because providing health care to employees is part of the state’s contractual obligation.
The revenue side of the budget is even less predictable than the state’s spending obligations.
Rep. Patricia Widlitz, D-Guilford, pointed out that the report from budget analysts shows sales tax collections are $23.5 million below projections at the moment
“Our preliminary read on sales tax revenues is that we are on target and we’re not seeing any kind of mass slippage,” Barnes replied. “Of course, we had two weeks where half the state was without power in which many smaller retailers may have been delayed in their filing.”
But Barnes said he was surprised to learn the “Christmas Effect” on the sales tax is less than he would have thought. The state brings in about 12 percent during the holiday months, while it brings in about 8 to 9 percent in the other months. The General Assembly increased the sales tax from 6 to 6.35 percent this year as part of the budget it passed May.
This year numerous changes were also made to the income tax which was implemented retroactively causing a great deal of confusion for both private and public workers. And while the income tax increases helped balance the budget, the presentations given by budget analysts showed it’s a very volatile tax.
“Over the past decade Connecticut’s income tax revenue has fluctuated dramatically,” the report from OPM states. “This was due to the performance of the stock market and two recessions. Performance in the financial markets significantly influences the growth in this revenue source.”
The income tax withholding rate in fiscal year 2013 is expected to grow 2.9 percent, while estimates and final payments are expected to grow 7.4 percent, according to OFA.
“I think we all understand these are all estimates,” Sen. Eileen Daily, D-Westbrook, said. “There’s no solid dollar amount here in any category, but we will learned an awful lot from these presentations.”
She called the presentations by budget analysts a “snapshot” of where the budget stands.
Barnes said he thinks the state has been appropriately conservative in its budget forecasts.
He said Connecticut hasn’t seen the drop in revenues in its budget that New York has had because it based a budget that was structurally sound and balanced in its approach.
Barnes opened his presentation by quoting New York Gov. Andrew Cuomo talking about the newly found budget woes in the Empire State and how the projections by budget analysts there are falling apart.