HARTFORD, CT — Nonpartisan budget analysts are projecting that the state of Connecticut will run a $3.2 billion budget deficit by 2022 and the reduction in revenue will impact the amount of debt the state will be allowed to carry.
The Office of Fiscal Analysis and the Office of Policy and Management told lawmakers Thursday that a lot of their predictions relative to a $2.3 billion loss in revenue are based on uncertainty.
The analysis released Thursday doesn’t make assumptions about when the state might reopen, but takes into consideration the depth of the pandemic.
The revenue projections for this year will not become more definitive until August, a month after the extended tax filing deadline of July 15.
The timing and the extent of the reopening of the state is still unknown. How will the COVID-19 pandemic impact business and consumer confidence? And what will the economy look like after widespread immunity is achieved?
OPM Secretary Melissa McCaw said the pandemic has created new challenges for Connecticut and every state in the country.
“For this year and the out-years, projections are complicated by the uncertainty of the magnitude and duration of this unprecedented public health and economic crisis,” she said.”We believe these estimates are conservative, and that this approach is fiscally prudent to ensure stability. We will continue to work with our federal partners to unlock additional support for the revenue losses experienced by the state and municipalities.”
The state has a little bit of a cushion because it has a $2.5 billion rainy day fund, but lawmakers will be forced to make a lot of hard decisions about spending cuts or tax increases in the years to come as revenue evaporates.
“Fortunately, due to foresight and smart fiscal policy, Connecticut is in a much better position than most other American states to weather this fiscal downturn, at least in the short term,” Senate President Martin Looney and Senate Majority Leader Bob Duff said in a statement. “Connecticut has 47.4 days’ worth of daily expenses in our $2.5 billion Rainy Day Fund; the national average is about half that, or just 28 days, according to the Pew Trusts. For contrast, Massachusetts has 31 days of budget reserves, South Carolina has 24 days, Florida 16 days, Kentucky four days, and Kansas has no budget reserve at all.”
The two lawmakers don’t deny that recovery from the presumptive recession will still be hard.
“We still face many difficult months ahead as the tendrils of the COVID-19 pandemic will continue to infect our economy and our recovery, but for the time being, Connecticut is in a stronger position than most states thanks to our fiscal prudence and the safeguarding of our budget reserve,” Looney and Duff said.
Rep. Jason Rojas, D-East Hartford, who co-chairs the Finance, Revenue, and Bonding Committee, said there’s nothing surprising about the numbers.
“This was to be expected given the difficult decisions that have been made to keep people safe during this unprecedented time,” Rojas said. “We are well-positioned to manage these difficult circumstances in the short-term because of the conservative budgeting practices we put in place over the past several years.”
The Office of Fiscal Analysis is predicting that this year’s deficit will be around $958.5 million.