The state budget situation has remained static over the past month and the state is still experiencing a $259.1 million deficit for the fiscal year that ends June 30, according to state Comptroller Kevin Lembo.
In his monthly letter to Gov. Dannel P. Malloy, Lembo said that the major cause of the deficit remains the underperformance of the income tax.
“The wage-driven withholding component of the income tax has been rising at a 3.2-percent rate through April on a fiscal-year-to-date basis and withholding receipts have also been accelerating in May,” Lembo said. “However, the estimated and final payment components of the income tax — which are highly dependent on non-wage income — have posted negative growth through April.”
Lembo noted that estimated payments are running 4.4 percent below last fiscal year and final payments down 1.2 percent.
“Stock market volatility that impacted Fiscal Year 2016 receipts was the strongest contributing factor in the decline,” Lembo said.
In order to help achieve the necessary budget savings both this year and next year, Malloy has said he will need to reduce the state labor force by more than 2,000 state employees. So far, as of May 26, he has only reduced executive branch employment by 693 employees. Another 239 Judicial Branch employees were also given pink slips. That’s less than half of the number the state needs to reach in order to achieve the necessary savings.
When the layoffs began on April 11, Malloy said he would need to separate state employees from state service by June 9 in order to achieve the savings.
Administration officials declined to say when they plan to reach the layoff numbers they estimated they would need in order to achieve the budget savings.
“We’re working hard to minimize any shortfall as we approach the end of this fiscal year,” Gian-Carl Casa, undersecretary for legislative affairs, said. “The budget adopted for next fiscal year better acknowledges the new economic reality faced by the country and Connecticut, and puts us on a firmer path to long-term fiscal stability.”
The 2017 budget, which is sitting on Malloy’s desk awaiting his signature, reduces salary accounts by $255 million and asks the administration to find an additional $69 million in employee savings.
A coalition of state employee unions refused to reopen its contract for health and pension benefits earlier this year. The contract doesn’t expire until 2022. None of the negotiations regarding salaries and working conditions for 14 of the 15 state employee unions have reached the final stages.
Meanwhile, Lembo said Connecticut’s economy continues to experience moderate growth, including 3,500 jobs added in April and growth in single-family home sales in March over the same month the prior year.