(Updated 2:16 p.m.) State Comptroller Kevin Lembo reported Monday that after accounting for Gov. Dannel P. Malloy’s $54.7 million in rescissions, the state is still on track to end the 2015 fiscal year with a $44.8 million deficit.
In his letter to Malloy, Lembo attributes the deficit to a $59.1 million reduction in revenue and a $14 million decrease in net spending.
The revenue reductions are the result of the consensus forecast developed by the Office of Policy and Management and the legislature’s nonpartisan Office of Fiscal Analysis on Nov. 10. The single largest reduction in revenue was $61.2 million in federal grants. About $25 million of that was based upon issues arising from the deferral of Medicaid revenue attributed to the expansion of the program’s population under the Affordable Care Act.
“The remainder of the shortfall resulted from delays in federal waivers sought by the Department of Mental Health and Addiction Services (DMHAS) and from delayed implementation of adoptive and foster care initiatives,” Lembo said. “I am deeply concerned that this significant decline in federal revenue was not identified earlier in the fiscal year.”
The Office of Policy and Management has developed an automated grant process that extends to federal programs and provides the state with a centralized database of grant activity, according to Lembo.
“It is critical that we have timely and accurate reporting of all planned and realized federal claims during a fiscal year,” Lembo told Malloy. “A recurrence of last month’s shortfall projection is unacceptable and prevents me from accurately reporting on the state’s fiscal condition.”
On Nov. 3, one day before the election, Lembo reported that the state was on track to end the year with a $300,000 surplus based on the available information he was given.
“Mr. Lembo’s concerns about federal revenue and the difficulty of accurately reporting the state’s fiscal position are right on the mark,” Office of Policy and Management Secretary Ben Barnes said Monday. “The actions of federal agencies with respect to our shared obligations are a source of uncertainty which we will continue to manage and report on monthly.”
He added that Lembo’s report was “largely in line with our own projections.”
Barnes said the unilateral rescissions and the management actions the governor has taken will “ensure that there will not be a deficit.”
But Senate Republican Leader Len Fasano wondered Monday why Malloy won’t call the General Assembly back into a special session to help eliminate the budget deficit. Malloy can rescind up to 5 percent of any line item and 3 percent of any fund without seeking legislative approval. With the legislature’s help he could cut much more from certain line items or spare certain programs.
“Let’s get everyone to the table and start solving the problem for this year and future years,” Fasano said.
Nonpartisan fiscal analysts and Malloy’s own budget office have predicted more than $1 billion deficits in fiscal year 2016.
Meanwhile, Lembo projected that spending was beginning to trend higher than targeted budget growth of just over 3 percent. However, he pointed out that Malloy’s administration had begun to take action to reduce spending through reductions.
Lembo remained optimistic that the Malloy administration would be able to eliminate the deficit before the end of the fiscal year on June 30, 2015.
“The remaining projected General Fund deficit amounts to 0.26 percent of the total General Fund budget,” Lembo wrote. “A deficit of that size can be eliminated through continued active management of spending and an improving economy.”
Lembo pointed out there are some positive signs that the economy is rebounding.
“The state has posted job gains in eight of the past nine months reversing an earlier trend of inconsistent job additions,” Lembo wrote. “Connecticut has regained 87,900 or 73.8 percent of the jobs lost to the 2008 recession. Wages in Connecticut are also beginning to show some upward movement after a long period of stagnation. Average private weekly pay in the state was up 2.8 percent in October from the same month last year.”