The legislature’s nonpartisan Office of Fiscal Analysis is predicting that the state will end this fiscal year with a $65.2 million deficit. That’s a far cry from the $22.9 million surplus the Office of Policy and Management projected a week ago.
In their report to the General Assembly, legislative budget analysts attribute the deficit to a projected $60 million drop in personal income tax collections.
Estimated personal income tax payments are down approximately 9 percent year-over-year, but 90 percent of that variance is due to the top 100 taxpayers with the remainder of filers trending flat, according to legislative budget analysts. Last year, Connecticut lost more than $217 million in tax revenue because the top 50 taxpayers lost more than $2.9 billion in income.
Legislative budget analysts speculated Monday that “the majority of taxpayers are utilizing ‘safe harbor’ provisions in the tax code which may be masking underlying strength for those filers.”
The withholding portion of the income tax was also down over the past month, which prompted OFA to reduce the growth rate from 2.7 to 2.2 percent and lower its expectations by $30 million.
Office of Policy and Management Secretary Ben Barnes made no revenue changes in his Feb. 21 letter to state Comptroller Kevin Lembo. The revenue numbers Barnes used were the same ones OFA and OPM agreed to back on January 17.
“It’s not a surprise that revenue continues to fall,” Senate Republican President Len Fasano, R-North Haven, said. “This drop directly correlates to six years of living under economic policies that don’t understand businesses or taxpayers.”
But Chris McClure, a spokesman for Malloy, said “reasonable minds can differ.”
He said in this case the two agencies can look at the same revenue data and draw different conclusions about what it means for the rest of the fiscal year.
“Nevertheless, we are discussing a difference of less than 0.5 percent of General Fund expenditures – an amount we can easily resolve in April for the next consensus revenue,” McClure added.
On Wednesday, March 1, Lembo will release his own budget projections for fiscal year 2017.
At the beginning of February, Lembo reported an $8.7 million surplus. It was less than the $23.3 million surplus reported on Jan. 20 by the governor’s budget office, but it was still a surplus.