Lembo: Time to fix worsening state budget deficit is now

State Comptroller Kevin P. Lembo agreed Wednesday with nonpartisan analysts that the budget deficit is worse than Gov. Dannel P. Malloy administration is projecting.

But while Lembo also urged the governor and legislature “proceed without delay” to reduce the shortfall, his $172.8 million deficit forecast falls just short of the level that would compel the governor to prepare a deficit-mitigation plan.

The comptroller’s latest monthly projection mirrors many of the concerns cited by the legislature’s nonpartisan Office of Fiscal Analysis and the administration, including Medicaid payments from Washington and hospital tax receipts that both are less than anticipated.

The comptroller and nonpartisan analysts also are more pessimistic than the administration about potential state income tax receipts due later this month after the April 15 filing deadline.

But Lembo also dug in on a problem he has warned the Malloy administration about repeatedly for the past 18 months. The comptroller estimates at least an additional $14.3 million is needed to cover the state’s responsibilities.

As early as October 2013, Lembo’s office – which administers the health care benefits for retired state workers and their dependents – warned the governor of a likely surge in costs in the 2014-15 fiscal year, largely because of an anticipated jump in retirements among prison guards.

Lembo repeated his warnings in March 2014 – when Malloy’s budget proposal for 2014-15 didn’t cover that projected surge in retirements – and in May, when the legislature and governor adopted a budget without those requested funds.

“My requested funding level was reduced in the final version of the budget,” Lembo wrote to Malloy in his April 1 report. “Had I received the requested funding, no cash shortfall would exist.”

Office of Policy and Management Secretary Benjamin Barnes, Malloy’s budget chief, issued a brief, written response to Lembo’s report.

“As we have assured Connecticut residents, we will make the difficult but necessary decisions to keep our budget in balance,” Barnes wrote. “That said, the April tax receipts will determine whether further action is needed.”

Lembo’s $172.8 million deficit projection falls just short of 1 percent of this year’s general fund, which covers the bulk of state government’s annual operating costs.

And while that might seem small, state law requires the governor to submit a deficit-mitigation plan within one month whenever the comptroller certifies a shortfall exceeding 1 percent of the general fund, which would be $174.6 million this year. That’s because large portions of the annual budget cannot be cut quickly in any given year because of contractual obligations.

The deficit forecast issued March 25 by the Office of Fiscal Analysis exceeds that threshold, standing at $191 million. The administration’s last estimate, issued March 20, stood at $133 million.

Legislative analysts also have been more pessimistic than the administration and Lembo about potential cost overruns involving magnet schools. And they say a potential surplus in the debt service account is not as large as Malloy’s staff projects.

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