HARTFORD, CT — Gov. Dannel P. Malloy said Friday that he will revise his budget proposal as soon as the new revenue numbers are approved next week.
State income tax receipts continued to fall behind projections as the week progressed and were down by about $450 million Thursday. Connecticut only has $235 million in its Rainy Day Fund so it has to resolve what will be a deficit this fiscal year and likely carry forward to the next two fiscal years.
Malloy’s original budget in February made sweeping changes to how the state funds municipalities and would have shifted some of the state’s burden for paying for things like the teacher pension fund over to municipalities. The proposal, which helps improve the state’s finances, was panned by cities and towns that have been held harmless the past six years.
Malloy’s original budget also dismissed large scale income and sales tax increases to close what was then a two-year $3.6 billion deficit, however, it did eliminate tax credits for middle-class families and the working poor.
Since approving a tax increase in 2015, which some say motivated General Electric to move its headquarters to Boston, the General Assembly and Malloy have had an aversion to tax increase.
“I think there is a recognition this is not about raising taxes, but finding a way to live within the means,” Malloy said Friday after an unrelated event.
Malloy said he realizes how hard it is for Democratic and Republican lawmakers to wrap their heads around the budget situation and the adjustments, “but we’ve to to get this worked on.”
The two-year budget deficit following Thursday’s collections will likely balloon to $4.6 billion.
Malloy said he appreciates that lawmakers “are finding it very difficult” to come up with a solution.
He said they will present a balanced budget adjustment, but the “hard part is getting other people to move in the direction of getting that done.”
He said he can’t predict how long that will take.
Connecticut has struggled over the past few years at predicting how much revenue it will bring in through income tax receipts in April.
“We are one of the most dependent states on high income earners. That’s a reality,” Malloy said.
As long as that’s the case, Connecticut’s revenue stream will continue to be volatile and difficult to project.
The estimates and finals portion of the income tax was down 10 percent, according to Office of Policy and Management Secretary Ben Barnes. He said they had only projected 2 to 3 percent growth in that category, so it’s surprising it was that far off the mark.
Malloy said there’s been a lot of changes in the hedge fund industry, which is reliant on investment income.
Meanwhile, the House Democratic caucus was talking about its budget options Friday behind closed doors. House Speaker Joe Aresimowicz, D-Berlin, said they would account for the decline in revenues even though they don’t have a formal budget package.
On Thursday the Finance, Revenue, and Bonding Committee approved a revenue package that actually reduces revenue in some areas. The Appropriations Committee failed Tuesday to approve a spending package.
Republican legislative leaders released their budget proposal Thursday afternoon and said they would revise it as soon as new revenue numbers are confirmed by the nonpartisan Office of Fiscal Analysis.