Bad budget news always comes after Election Day and this year is no different.
Nonpartisan legislative analysts and Gov. Dannel P. Malloy’s budget office agree revenues are lagging nearly $60 million behind their targets this year and could contribute to a budget deficit as early as December.
The Office of Policy and Management and the Office of Fiscal Analysis agreed state tax revenues are running approximately $59.1 million shy of what was anticipated when the legislature passed the budget in June.
The decline in revenues follows news prior to the election from legislative analysts that there is the potential for about $83 million in cost overruns in the budget.
Ben Barnes, Malloy’s budget director, warned the revenue numbers were early projections. The fiscal year doesn’t end until June 30.
“This is an early projection for this fiscal year, and it is appropriate for us to be cautious,” Barnes said. “We all hope that an acceleration of economic growth will raise revenue beyond our current forecast.”
This estimated revenue shortfall is just 0.3 percent of the state budget. If the deficit reaches 1 percent of the general fund then lawmakers will be called back to session to deal with it.
“It is important to note that our estimates of tax revenue are slightly above the targets – our estimate concerning the personal income tax is on the mark and sales tax revenue is up almost $50 million,” Barnes said. “Even our projected decline in Oil Companies Tax revenue is a reflection of good news – gas prices are down. Overall, this projection shows the underpinnings of our economic recovery remain solid.”
But Republicans remain wary.
“The continued erosion of the state’s fiscal health, based on today’s release of the consensus revenue figures, were both troubling and predictable,’’ Rep. Themis Klarides, R-Derby, said Monday. “Given that these made up revenue figures were plugged into the budget last spring at the last minute to make it balance despite Republican objections, gives us no comfort.”
Klarides is referring to a decision by Democratic lawmakers to exclude about $51 million in healthcare costs for Correction officers who are scheduled to retire. Barnes has said he doesn’t believe the officers will take retirement. At the same time, the legislature decided it would plug a last-minute budget hole with $75 million in revenue from delinquent taxpayers.
So far this year, the state has been successful in collecting about $30 million of that revenue. It has seven more months to find that revenue.
According to Monday’s report, gas taxes seem to be coming in under estimates because gas prices are down, and the sales tax seems to be exceeding expectations.
The next consensus revenue estimates are due on Jan. 15. Those are the ones Malloy will use to draft his budget, which he will present to the legislature in February.