Gov. Dannel P. Malloy said he’s not endorsing the newly released deficit figures, which show Connecticut is facing a more than $1.2 billion deficit over the next 18 months, but he is also not surprised by them.
Connecticut is “quite dependent on the highest income earners, in many cases with passive income to pay the tax bill,” Malloy said at an unrelated press conference at the Legislative Office Building Friday.
On Thursday the legislature’s nonpartisan Office of Fiscal Analysis released new deficit figures, which show the state is facing a $266 million deficit this year and a nearly $900 million deficit in 2017. The reduction in revenues, according to legislative budget analysts, is largely due to a steep drop in personal income tax collections.
Connecticut’s private sector restored all the jobs it had lost during the recession, but the overall economy has still been slow to improve. That’s because the state created more middle- and low-paying jobs, but it hasn’t recovered the higher paying jobs.
Industries where the average annual wage is around $80,000 lost 54.1 percent of their jobs between March 2008 and February 2010 and have only regained about 8.2 percent of those jobs, according to Malloy’s budget office. Low wage industries where the average annual salary is less than $50,000 a year lost 39.9 percent of their jobs during the recession and gained 61.5 percent between February 2010 and December 2015.
“There are shifts in the economy that could account for a some portion of this,” Malloy said.
But he said the real problem is Connecticut’s overreliance on high income earners who derive most of their wealth from the stock market.
He said the new numbers are reflective of things that have become more apparent in the last month.
“I’m not endorsing these numbers,” Malloy said. “Quite frankly, it could get better or it could get worse.”
However, Malloy said he doubts it will get better, but he doesn’t plan to propose any tax increases to make up the difference. Large scale layoffs though are still on the table.
Senate Minority Leader Len Fasano, R-North Haven, said Thursday that the reason the revenues are declining is because residents are leaving the state.
The Malloy administration has maintained that it’s the stock market’s impact on high-income earners.
Rep. Vincent Candelora, R-North Branford, said Friday that stock market has an impact, but “I think we have to recognize the bad policies” that are causing residents and businesses to leave the state.
“We know that capital gains have driven our revenue numbers down,” Candelora said. “I think now what we’re seeing is these bad tax policies and these tax increases that have been implemented over the course of the last six years is now impacting other revenue streams.”
The combination of the two is causing people to leave the state, Candelora said.
Regardless of what caused the budget deficit to balloon, state Comptroller Kevin Lembo is expected to certify this year’s budget deficit next week on Tuesday, March 1. Legislative analysts and Malloy’s budget office don’t have to agree on the deficit figures until April 20.