Gov. Dannel P. Malloy CT Mirror
Gov. Dannel P.  Malloy
Gov. Dannel P. Malloy

As the April 15 tax deadline approached, speculation at the Capitol was that tax receipts would rise. The only question was, Would they grow modestly, or explode?

But early tax returns have weakened hopes for any explosion, and raised the specter of something worse: Are tax receipts on the decline again?

This helps explain why the launch of keno gaming in Connecticut remains very much under consideration by Gov. Dannel P. Malloy’s administration and the General Assembly.

Through Monday, projected income tax receipts for April were running below budgeted levels by almost $108 million, or 10.2 percent.

The April numbers play a crucial role in projecting likely tax receipts, for the rest of the fiscal year, and the next few years.

The nonpartisan Office of Fiscal Analysis updates the legislature on income tax receipts each business day between April 15 and April 30. But Tuesday’s report was one of the most important of this period for two reasons:

  • It supplied data from three days’ worth of returns, covering those received in Friday, Saturday or Monday’s mail.
  • And, the first weekend after the April 15 deadline traditionally features the heaviest volume of tax filings.

The task of projecting income taxes is particularly difficult, given that receipts are very volatile. In past Aprils, monthly projection totals have changed by more than $100 million in a single day.

Officials from both parties were guarded in their assessment of Tuesday’s update.

“We need to wait and look at the whole picture,” said Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the tax-writing Finance, Revenue and Bonding Committee, who added that the income tax projections to date have played a role in keeping keno’s possible launch alive.

The tax receipts through Tuesday “are not a positive development, but I’m going to reserve judgment for now,” said Rep. Sean Williams of Watertown, the ranking GOP representative on the finance panel.

“We and OFA will issue consensus revenues by the 30th,” Gian-Carl Casa, spokesman for the governor’s budget office, said Tuesday. “A lot can change between then and now.”

The stakes tied to these income tax projections are huge, and involve more than the prospect of expanded gambling. The next budget – not to mention the state’s fiscal outlook entering the 2014 gubernatorial campaign – also will be affected.

For example, if income tax receipts close in April $108 million below budgeted levels – where they are projected now – the current budget surplus of $500 million gets chopped by one-fifth. Malloy’s plans to use those funds for a tax rebate and to bolster the emergency budget reserve and state employees’ pension fund also could be affected.

At the same time, analysts likely would lower projected tax receipts for the next budget, and for 2015-16 – where they already are predicting a $1 billion deficit.

But if income tax receipts surge $300 million above budgeted level, for example, several good things happen, particularly for Malloy:

This year’s surplus grows dramatically.

And, another big surplus would be projected for the budget starting July 1, likely leaving the budget reserve with more than enough money to cover any post-election deficit.

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Keith M. PhaneufState Budget Reporter

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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