Connecticut’s budget outlook went from bad to worse Thursday when the Office of Policy and Management reported that the state is projecting $1.18 billion shortfall for fiscal year 2014 and a $959 million shortfall in 2015.
That’s on top of news the state’s fiscal year 2013 budget is already $365 million in the red.
Despite the bad news, Gov. Dannel P. Malloy remained optimistic about the situation.
At a Capitol press conference following his monthly commissioner’s meeting, Malloy said he won’t raise taxes to close the $365 million deficit and he has “no intention” of raising taxes to close the two-year budget shortfall.
Pressed about why he won’t pledge not to raise taxes, Malloy said bluntly that he almost lost an election because he refused to take a pledge like that.
“I’m giving you as definitive language as I am comfortable giving you at the moment,” Malloy told reporters.
If state Comptroller Kevin Lembo certifies a $365 million deficit on Dec. 1, the governor has 30 days to present the General Assembly with a deficit mitigation plan. In February, he will present his two-year budget, which will have to close a projected two-year, $2.13 billion deficit based on the numbers presented Thursday.
Ben Barnes, Malloy’s budget director, said he’s not “shrinking away” from the current budget woes, which are less severe than when Malloy first took office.
Admittedly, there are far fewer ways to close the budget deficit over the next two years, but Barnes said he’s up to the challenge.
“We need to solve the problem through reduced spending,” Barnes told the commissioners Thursday.
Malloy assured his state agency commissioners that the state will live within its means and acknowledged that it “means we’re going to have to make some painful spending cuts.”
He said $365 million is a tenth of the $3.65 billion deficit he inherited when he took office. He said his administration solved 90 percent of the problem in his first 22 months, while it took Republican governors 22 years to create the problem in the first place.
On Wednesday, House Minority leader Lawrence Cafero said the budget gap would grow and suggested the administration was being less than transparent in reporting the shortfall.
“What you see now is just a precursor. It’s going to grow,” he said.
Malloy pushed back Thursday, saying Cafero’s comments were colored by his aspirations to run for governor. He suggested reporters should mention as much in their stories.
“He’s wrong. Rep. Cafero has expressed his desire to become the governor of the state of Connecticut. I think you folks are going to have to get used to putting everything in context. I’m sure that will appear in your papers every time you report what he has to say,” Malloy said.
The governor said information was released as it became available and pointed out that the fiscal year doesn’t end until July, making the current budgetary gap a shortfall rather than a deficit.
“It’s not going to be a deficit. It’s going to be addressed,” he said.
Cafero said he hasn’t declared he’s running for governor, nor has he explored for it. He said he’s been consistent with his criticism, regardless of what he may do in the future.
“This is factual, this isn’t my take on it, I’m not editorializing it and I don’t need to put it in context. That things have all of the sudden, overnight, been dramatically worse,” he said.
The administration went from projecting a $52 million revenue shortfall to estimating a $365 million gap in the budget, Cafero said.
“That means every day that goes by in this fiscal year, we are spending a million dollars more than we’re taking in,” he said.
As far back as March of this year, Malloy’s budget office had anticipated using a 2012 surplus to help balance the 2013 budget. When the surplus turned into a deficit is when the General Assembly decided to delay paying off the borrowing in did in 2009 to balance this year’s budget.
But less than five months into the fiscal year, that budget may already be $365 million in the red and the 2014 and 2015 budget projections are already running a $2.13 billion shortfall.
In addition to the shortfall, the fiscal year 2014 budget spends $1.24 billion over the state’s allowable spending cap. In fiscal year 2015, it’s $1.81 billion over the spending cap.
So no matter what happens, the Malloy administration will have to cut spending if it wants to stay under the statutory spending cap.
“Extraordinarily difficult decisions to reduce spending will be necessary,” the report released Thursday says.
This means programs and services will need to be reduced or cut in order to balance the budget. But Malloy declined to say exactly where those cuts would be made.
“Everything is on the table, but you actually know who I am and where I come from, so you can understand that some things are lower, at different places on the table,” Malloy said responding to a question on possible cuts municipal aid.
A former mayor for 14 years, Malloy has preserved and in some cases increased funding to municipalities during his first two years.
Human services account for about 29 percent of the annual state budget, and grants to cities and towns are about 14.2 percent of the annual budget.
The agreement Malloy made during his first year with the state employees protects most of them from any wide-scale layoff over the next two years.
And for those state employees hoping for an early retirement incentive, Malloy said the state does not pay people to retire.
“Because it further burdens the retirement system, which none of my predecessors funded properly,” Malloy added.