HARTFORD, CT – Even after the settlement with Connecticut’s hospitals, Gov. Ned Lamont is predicting the state will end the year with a $22.9 million budget deficit.
“While the projected shortfall represents only about 0.1 percent of the General Fund, agencies are making efforts to curtail hiring and discretionary expenditures, and the governor is prepared to exercise recission authority if necessary to mitigate against ending the year with an operating budget,” Office of Policy and Management Secretary Melissa McCaw wrote in her monthly letter to state Comptroller Kevin Lembo.
Connecticut’s Rainy Day Fund is still on track to end the year with $2.8 billion by the beginning of the next fiscal year, which is 13.9% of the general fund.
Earlier this month, before the details of the hospital agreement were released, Lembo projected that the state would end the year with a $31.6 million deficit.
The projection was higher based on a $24 million shortfall in the fringe benefits account.
“The State Employees’ Health Services account has the largest deficiency, primarily due to fewer than anticipated retirements,” Lembo wrote. “This shortfall is partly offset by a projected surplus in other fringe benefit appropriations, particularly the Alternative Retirement Program (ARP) account. In FY 2019, approximately 1,600 employees transferred out of ARP into the State Employee Retirement System (SERS) as part of a grievance award. The decreased enrollment in ARP has resulted in lower spending.”
McCaw is also predicting a shortfall in the fringe benefit account, but not as big as the one Lembo is predicting.
McCaw is projecting a net shortfall of $18.9 million, including projected shortfalls of $35 million in the State Employees’ Health Service Cost account to reflect higher than expected claims experience and premium costs, $1.5 million in the Employers’ Social Security Tax account and $1.4 million in the state employees retirement defined contribution match account.
“Partially offsetting these shortfalls are a projected lapse of $2.5 million in the Unemployment Compensation account; a $3 million lapse in the Other Post Employment Benefits account; and a $13.5 million lapse in the Higher Education Alternate Retirement Program (ARP), which is attributable to 1,600 employees shifting from ARP to SERS as an outcome of a grievance award, ” McCaw wrote.
The other budgeted deficiencies that are contributing to the budget shortfall include $6.5 million at the Department of Emergency Services and Public Protection, $1.5 million at the Department of Mental Health and Addiction Services, $13.8 million in the Department of Social Services Medicaid account, $1.8 million at the Office of Early Childhood, and $11 million at the Department of Correction.
Most of the deficiency at the Department of Correction is related to inmate medical care. Overtime costs for medical staff have continued to increase as the agency tries to find the appropriate staffing levels, according to McCaw.
Lembo’s next budget projection will be released on Jan. 2.