The legislature’s nonpartisan Office of Fiscal Analysis revised its February deficit projections slightly Monday estimating that the state will now end the year with a $124.4 million deficit, instead of a $161 million deficit.
That means the deficit shrank by about $36.6 million mostly attributable to decreased spending. OFA’s monthly report said spending decreased by $40.9 million and was partially offset by a projected $4.3 million decline in revenue.
Gov. Dannel P. Malloy’s budget office estimated a week ago that the state would end the year with a $12.4 million surplus. However, if Generally Accepted Accounting Principles are applied, it becomes a $62.2 million deficit.
The Office of Fiscal Analysis said their number does not set aside the $75 million the state needs to convert to GAAP this year, but it includes the $78.8 million Malloy’s office promised to rescind or lapse from the budget back in January.
Legislative analysts said that if Malloy’s budget office uses the $80 million in additional funding from a line item carried over from former Gov. M. Jodi Rell’s administration, the deficit could drop to around $40.7 million.
The amount of money the Malloy administration intended to hold back from state agencies in “budgeted lapses” was a big concern for legislative analysts earlier in the fiscal year. However, as legislative analysts have been able to account for more and more of the money, it apears likely that the Malloy administration will meet its goal and achieve them.
“As we noted last month, the biennial budget is heavily reliant on budgeted lapses to achieve balance,“ OFA wrote in their monthly report. “So far, of the $777.9 million budgeted, we have been able to identify $708.6 million in lapses.”
In January it was able to identify $651.4 million in lapses. But last November OFA expressed doubt that the administration would be able to hold back about 3.9 percent of the entire budget, most of which comes from savings related to the State Employees Bargaining Agent Coalition agreement.
OFA did not project the large dip in revenue that Malloy’s office predicted regarding the amount of revenue the state is giving back to residents through income tax refunds.
In his monthly letter to the state Comptroller, Office of Policy and Management Secretary Ben Barnes wrote that he expects “the state will issue $50 million more in Personal Income Tax Refunds this fiscal year.”
On March 1, State Comptroller Kevin Lembo said his number differs from the Malloy administration’s because he believes the Earned Income Tax Credit is generating refunds about 20 percent above budget projections and estimates it will exceed expectations by $22 million.
While Barnes never directly attributes the decrease in revenue to the Earned Income Tax Credit he estimates tax refunds will increase $23.5 million.
Lembo will write Malloy on April 2 with his latest budget projections.