HARTFORD, CT – Connecticut’s revenues are doing better than lawmakers and Gov. Ned Lamont predicted just a few months ago.
According to the legislature’s nonpartisan Office of Fiscal Analysis and the Office of Policy and Management, revenues remain largely unchanged relative to what was reported in November 2019.
The consensus revenue report released Wednesday afternoon shows this year’s budget deficit growing slightly, but still less than the 1% that would trigger the need for gubernatorial recissions.
Part of the reason for the slight dip in revenue is $65 million for tax refunds. Those refunds are not expected to continue into future years.
Most of the reason for the continued deficit is on the spending side. The recent hospital settlement is expected to increase spending by $104.2 million more than anticipated.
Earlier this month, state Comptroller Kevin Lembo predicted that the state would end the year with a $28 million deficit. The consensus revenue estimates likely will add another $32 million to that estimate.
However, even with an increase in the deficit, Sen. Cathy Osten, who co-chairs the Appropriations Committee, said she doesn’t believe it’s necessary for Lamont to be proposing mid-year budget cuts.
Office of Policy and Management Secretary Melissa McCaw wrote state agency heads earlier this month and asked them to “eliminate expenditures that are not absolutely critical in nature.”
“While the projected shortfall represents a relatively small percentage of the overall General Fund budget, given the likelihood that further spending reductions will be necessary to ensure both balance and spending cap compliance for FY 2021 and beyond, it is imperative that management actions be taken immediately to ensure budget balance is maintained,” McCaw said in a Jan. 6 memo.
However, Connecticut is much better equipped to handle budget deficits today than it was a decade ago.
Connecticut currently has $2.5 billion in its rainy day fund. It still plans on adding to that fund before the end of the year under the new volatility cap formula. It’s estimated that the Rainy Day Fund will total about $2.8 billion by the end of the fiscal year.