Despite attempts last month to put the state’s fiscal house in order budget analysts agreed Friday that revenues are running short of projections opening up a $500 million hole in the state budget over the next two fiscal years.
A drop in personal income tax receipts are driving the revenue numbers downward, according to numbers from the legislature’s Office of Fiscal Analysis and the Office of Policy and Management.
When the budget was adopted in June lawmakers estimated the state would bring in $9.83 billion in income taxes and on Friday budget analysts adjusted that number down to $9.57 billion. Sales tax was adjusted slightly downward too from $4.36 billion to $4.23 billion.
The deficit is about $26.8 million in 2016 and balloons to $502 million in 2017.
“The world is changing and we’re going to need to take the tough but necessary steps to change with it,” Gian-Carl Casa, undersecretary for legislative affairs at the Office of Policy and Management, said. “Households need to curb spending when necessary, and so does government.”
The bad news comes the same week General Electric announced it was moving its headquarters and 800 jobs to Boston.
Republican lawmakers pounced on the bad fiscal news and used it to promote the long-term fixes they say were rejected by the Democratic majority during the December special session. Lawmakers cut about $350 million from the 2016 budget in December and started January with a $200,000 surplus, which, according to these new estimates, evaporated just 15 days into the new year.
“The projections released today only further underscore how perilous our state’s finances are,” House Minority Leader Themis Klarides, R-Derby, said. “Without long-term adjustments to spending, Connecticut will continue to lose population.”
She said the “devastating blow” of losing GE coupled with falling revenues shows that “Connecticut is headed in the wrong direction.’‘
Senate Minority Leader Len Fasano, R-North Haven, wondered what it’s going to take for Democratic lawmakers to take the state’s budget crisis seriously.
“When will Democrat lawmakers wake up? Raising taxes every time revenue drops only further drives people and revenue out of the state. It’s a vicious cycle, and the only way to break it is to change,” Fasano said. “Connecticut needs long-term structural changes to the way we tax, spend and budget.”
Gov. Dannel P. Malloy will have to resolve a more than $500 million deficit when he presents his budget adjustments to the General Assembly on Feb. 3.
Lawmakers will then have less than four months to make their own changes before they head out and campaign for re-election.