After the biggest tax increase in the state’s history and a built-in surplus, some lawmakers never expected to be dealing with another budget deficit so soon. But that’s exactly where they found themselves Monday.
State budget analysts from both Gov. Dannel P. Malloy’s Office of Policy and Management and the legislature’s nonpartisan Office of Fiscal Analysis estimated Monday that the state would end the year with a $275 million to $285 million budget deficit. Revenue, according to budget analysts, dipped about $150 million this year.
“Nothing has changed. It’s not the path less taken. It’s exactly where we were two years ago,” House Minority Leader Lawrence Cafero, R-Norwalk, said.
The deficit is large enough to require Malloy to submit a budget mitigation plan to the General Assembly and it has the administration reminding people that last year the state was facing a $3.6 billion deficit.
“While today’s drop in estimated revenue is disappointing, the fact remains that we’ve solved more than 94 percent of the budget shortfall,” Ben Barnes, secretary of the Office of Policy and Management said in a statement. “And let’s be clear about one thing: we will end the current fiscal year in the black.”
Barnes attributed the budget deficit largely to a $147 million decrease in income tax receipts.
“To put these numbers in perspective, our estimated deficit is equal to approximately 1 percent of general fund expenditures,” Barnes said. “In November of 2010, we faced a deficit that was 17 times greater. Clearly, we have made real progress in tackling the immense problems left on our doorstep long before we moved in.”
Outside his capitol office, Barnes said the administration will be asking the General Assembly to delay paying the $222 million it reserved to pay off the borrowing it did to balance the budget in 2009. In that year, the legislature borrowed close to $1 billion to balance its budget and promised to use any surplus funds in future years to pay off the borrowing. Malloy panned the move on the campaign trail.
Since the Economic Recovery Notes don’t need to be paid off immediately, Barnes said the state can take its time making the payments without injury to the state’s finances. But Barnes will need the approval of lawmakers to do it.
“This strategy will allow state government to use money saved to pay down debt early to cover the unexpected revenue shortfall, so that we won’t be forced to cut essential services for Connecticut’s most vulnerable residents,” Barnes said. “We will continue to pay down the ERNs in accordance with the required repayment schedule.”
Cafero called the proposal a “gimmick” and he reminded reporters Monday that Malloy “railed against” such gimmicks when he took office in January 2011.
“I hope Connecticut’s experience with the first two years of the Malloy administration puts to rest once and for all the idea that government can simply tax its way out of a fiscal crisis,” Sen. Minority Leader John McKinney, R-Fairfield, said in a statement.
“When you try to balance a budget on revenue alone it doesn’t work. They’re too volatile,” Cafero said.
He said the Malloy administration needs to stop talking about the problem it faced when it walked in the door and it needs to take responsibility for a budget it proposed and implemented.
“Admit that you failed and let’s go back to the drawing board,” Cafero added.
The bad budget news creates an even bigger problem for fiscal year 2013. It means that the budget Malloy proposed Feb. 8 — which included an increase in education spending — and the legislature’s Appropriations Committee budget are both out of balance.
The General Assembly and Barnes will be hustling in the last week of the legislative session to figure out how to balance and pass the 2013 budget before adjournment May 9.
Rep. Toni Walker, co-chairwoman of the Appropriations Committee, said she will be going over the various budget scenarios. She admitted there is policy “we will have to change or not enact at this time because of budgetary issues.”
The biggest of which may be the education reform proposal.
“What do we do with education?” Walker said. “That’s a $128 million new policy.”
The question about whether the General Assembly is prepared to give Malloy the power to delay the payments on the Economic Recovery Notes is an issue for legislative leadership, Walker said.
Asked if it was an easier solution to the state’s budget woes than spending cuts, Walker replied: “Simple solutions don’t always translate to something that easy.”