Malloy reaffirms plans to use spending cuts to balance budget, continue GAAP conversion
Gov. Dannel P. Malloy reaffirmed his commitment Wednesday to keep the state’s finances in balance without further tax hikes — and to continue the conversion to Generally Accepted Accounting Principles — even though declining revenues are making both prospects increasingly difficult.
Speaking with reporters after announcing a new economic development venture in South Windsor, Malloy said the solution to his fiscal challenges is simple. “We’re going to make spending cuts,” he said. “That’s what we do. We balance the budget.”
Fiscal analysts for the executive and legislative branches agreed on a consensus revenue report late Tuesday that pushes the current budget to the brink of a deficit.
The $20.14 billion plan approved for the current fiscal year, which was balanced in part with a record-setting $1.5 billion tax hike, was built to finish with a general fund surplus of $88 million. And as of late December, the administration still was projecting an $83 million surplus.
But the latest consensus numbers adopted now show general fund revenues down nearly $95 million this fiscal year from the level anticipated in the adopted budget.
Malloy, a Democrat, was criticized late Tuesday by Republican legislative leaders who said the hefty tax hike has dampened Connecticut’s economic recovery.
But Malloy noted his critics also complained after the budget was adopted with a built-in surplus. “There’s a reason we built a cushion into the budget,” Malloy said, adding that revenue projections never are certain and without this fiscal buffer, the budget situation would be worse. “They want to have their cake and be able to eat it too.”
To keep his pledges, though Malloy will have to do more than simply keep the budget out of the red.
He needs to finish with a $75 million surplus to have the funds needed to continue the conversion of state finances to GAAP rules.
According to legislative analysts, state government would need an extra $1.5 billion on hand to fully follow GAAP principles. And that GAAP differential grows each year because of inflation.
When the budget was adopted in June, Malloy signed language that allowed him to delay the first of 15 annual payments to cover that $1.5 billion differential until 2014.
But he did commit to dedicate the first $75 million of the built-in surplus to cover the inflationary growth in the GAAP differential.
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