Hugh McQuaid file photo

Gov. Dannel P. Malloy’s budget office is projecting that the state will end the year with a $31.6 million deficit after the $54.7 million in rescissions it implemented in November.

That’s a slight improvement from the $44.8 million deficit projected by state Comptroller Kevin Lembo earlier this month.

Office of Policy and Management Secretary Ben Barnes wrote Monday in a letter to Lembo that, “If necessary, further management actions—potentially including additional rescissions—will be taken to ensure the year ends with a positive operating balance.”

Barnes and Malloy have maintained that they would end the fiscal year on June 30 with a balanced budget. Currently, the deficit is less than 1 percent of the general fund so they can act unilaterally without the legislature’s help.

As far as revenues are concerned, the administration is taking a wait-and-see approach.

“Our revenue forecast remains unchanged from last month and continues to reflect the consensus estimate reached by OPM and the legislature’s Office of Fiscal Analysis on November 10th,” Barnes wrote. “It is worth noting that the next consensus forecast is due January 15th and may result in change to next month’s projections. No information is available today, however, suggesting any improvement in revenues is likely.”

On the spending side, the state is expected to spend $27.2 million less than it originally budgeted. But Medicaid is running a $70 million shortfall because reimbursement from the federal government has not arrived.

Barnes said his office, the Department of Social Services, and the federal government were looking to resolve the issue, which has been pending since this summer.

The federal government deferred partial payment to the state for its expanded Medicaid population in July. Since the legislature moved Medicaid outside of the normal budgeting process, the deferral wasn’t reflected in surplus or deficit figures, but impacted the state’s cash flow because the state was still paying providers on behalf of its Medicaid patients. It had expected to receive 100 percent reimbursement from the feds, but it has only received 50 percent reimbursement.

In the meantime, the state has continued to negotiate with the Centers for Medicaid and Medicare Services in an attempt to recover the second half of the payment.