Malloy doesn’t get predicted revenue boost, big deficits remain

Gov. Dannel P. Malloy (file photo)

Mark Pazniokas / Ctmirror.org

Gov. Dannel P. Malloy (file photo)

Connecticut’s economy has not eased the state’s budget crisis as Gov. Dannel P. Malloy predicted on the campaign trail last year.

A new analysts’ report Thursday found tax receipts and other revenues still likely to grow as originally anticipated last summer – when major deficits were projected for the next two fiscal years.

That means the governor — who has called those earlier estimates “extremely conservative” – still must close shortfalls topping $1.3 billion next fiscal year and $1.4 billion in 2016-17. Malloy, whose budget plan is due to legislators on Feb. 18, repeatedly has ruled out tax hikes.

The consensus revenue forecast issued Thursday by the governor’s budget staff and by the legislature’s nonpartisan Office of Fiscal Analysis also expanded the relatively modest deficit in the current state budget. Analysts reduced projected revenues for this year by $38 million.

“While the Consensus Revenue estimates show some deterioration in the current fiscal year – largely due to lower oil prices – we are confident we can balance the budget through reduced spending between now and June 30,” Office of Policy and Management Secretary Benjamin Barnes, the governor’s budget director, wrote Thursday in a statement. “The revenue estimates for the biennium will be the basis for the Governor’s budget proposal.”

Malloy, who defeated Greenwich Republican Tom Foley in November to win a second term, spent much of last summer and fall downplaying the post-election deficit forecasts.

The economy was rebounding even faster than state analysts realized, Malloy said, even though their forecasts already assumed tax receipts would grow by about 7 percent over the next two years combined.

Connecticut could expect more, according to the governor. And the revenue from that extra growth would make the deficit relatively easy to manage, provided municipal aid was kept flat and agencies did not receive inflationary spending increases, he said.

Foley was even more optimistic in his statements, saying he could close the deficit without cutting most sections of the budget and while also offering hundreds of millions of dollars’ worth of new sales tax cuts.

But the latest consensus report shows general fund tax receipts climbing 1.9 percent next fiscal year, and by 4.8 percent in 2016-17 – or about the same 7 percent over two years first projected last spring.

The governor and legislature have one more chance, though, for some fiscal good luck. Analysts must submit one more revenue projection – on April 30 – before the next state budget is adopted.

“Sadly, our state’s financial situation is worsening,” Senate Minority Leader Len Fasano, R-North Haven and House Minority Leader Themis Klarides, R-Derby, wrote in a statement Thursday. “…We can blame this growing hole on a lot of things. We can argue that we don’t have control of many factors at play. But that gets us nowhere. As we’ve said before, we have to be proactive about addressing our state’s fiscal crisis. It’s time the governor and legislative leaders sit down together and hold a bipartisan meeting to identify long-term solutions. We all want to see a brighter future for Connecticut.”

The latest report gave the governor and legislature some bad news in the current budget, with overall revenues down about $38 million. State Comptroller Kevin Lembo already is projecting a very small deficit of about $32 million, equal to about one-fifth of 1 percent of the general fund.

The biggest decline is tied to Connecticut’s falling gasoline prices. The Petroleum Products Gross Receipts Tax, which reflects a percentage of wholesale fuel prices, was supposed to yield $414 million this year, with $379 million of that earmarked for transportation.

But projected receipts, which were downgraded to $404 million in November, dropped to $360.3 million on Thursday.

Analysts also downgraded expectations modestly for receipts this year from taxes on cigarettes and hospitals.

But they also upgraded expectations Thursday for sales tax receipts for the second time since the fiscal year began on July 1. The second-largest state tax after income, sales tax revenues now are on pace to approach $4.23 billion — $60 million ahead of initial projections.

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