Lembo’s projection, which matches the shortfall reported Oct. 19 by Gov. Dannel P. Malloy’s budget agency, is not large enough to require the governor to develop a deficit-reduction plan. That requirement is triggered whenever the comptroller certifies a shortfall greater than 1 percent of the general fund. In the context of this year’s $20.54 billion total budget, the general fund — which covers most operating expenses — totals $19.14 billion, leaving the 1 percent threshold at $191.4 million.
Despite the deficit’s modest size, Lembo wrote to Malloy that “I am increasingly concerned with the deterioration in revenue receipts, especially in the sales tax category. The potential for a deficit in excess of 1 percent of General Fund appropriations is growing.”
Both Lembo and the Malloy administration reported a $27 million deficit a month ago.
Projections for all revenue sources are running about $15.7 million above projections — but only because the state’s need to provide Medicaid services to the poor has been growing. Additional state spending in this area triggers added federal grants to cover a portion of those Medicaid costs.
Without the extra federal aid, state revenues would be less than what the original budget assumed.
Lembo also noted that spending is on pace to exceed the budget by $80 million, also due largely to growing demand for Medicaid services.
The projected deficit could be closer to $100 million if recent revenue estimates from the legislature’s nonpartisan Office of Fiscal Analysis prove correct.
An Oct. 17 report from OFA downgraded expectations for state government’s share of video slot revenues from the two casinos in southeastern Connecticut, as well as receipts from sales and electricity generation taxes.
“We continue to face challenges that we must confront with the directness and transparency that are the hallmarks of Governor Malloy’s career in public service,” the governor’s budget director, Benjamin Barnes, said Thursday.
“The continued sluggishness of the national economy and its potential impact on state revenues is chief among those challenges, and we will take necessary steps to ensure that we constrain spending to live within our means. To that end, we are closely monitoring revenue and expenditure trends and will recommend actions that further our efforts to bring the state’s finances into long-term balance while protecting the health and safety of our residents.”