Senate President Pro Tem Martin M. Looney file photo
Senate Majority Leader Martin M. Looney, D-New Haven
Senate Majority Leader Martin M. Looney, D-New Haven file photo

One of the top Democrats in the Senate conceded Thursday that Gov. Dannel P. Malloy’s rebate program might need to be scaled back if disappointing tax revenue projections don’t improve soon.

But given that Malloy’s rebate proposal involved a modest $55 per person, Senate Majority Leader Martin M. Looney, D-New Haven, said reducing the number of taxpayers receiving a check might make more sense than lowering the rebate amount.

Answering Capitol reporters’ questions about the rebate after a midday press conference, Looney also warned that “it’s too soon to speculate” on whether the rebate should be scrapped entirely. Senate Minority Leader John P. McKinney, R-Fairfield, urged the Democratic governor Wednesday to do just that.

Malloy is seeking legislative approval to give $55 in September to all Connecticut individuals earning less than $200,000 per year, and $110 to all couples earning less than $400,000. The governor would pay for it using $155 million of the $500 million surplus projected for the current fiscal year.

The administration estimates that 2.7 million residents would receive rebates.

Malloy’s plan also calls for another $100 million of that surplus to be deposited into the state employees’ pension fund and the remaining $250 million to go into the emergency budget reserve.

But that surplus could shrink soon – and by a lot.

The legislature’s Appropriations Committee indicated in early April that it wanted to use $60 million of that surplus to plug a hole identified by nonpartisan analysts in the governor’s budget proposal for the fiscal year beginning July 1. That leaves only $440 million for the governor’s initiatives.

The much larger problem, though, involves the ongoing analysis of state income tax receipts begun after the April 15 filing deadline.

Nonpartisan analysts tracking those filings say receipts for this month – based on returns filed through Wednesday — could fall almost $293 million short of expected levels.

Income tax receipt totals typically fluctuate by wide margins each day during the first two weeks after the deadline. And analysts warned Thursday that returns are arriving more slowly this year than in past ones. Still, if that $293 million projected drop in income tax receipts holds up, it would reduce this year’s surplus by the same amount.

Applying that potential loss would leave less than $150 million in this year’s surplus – already too little for both the rebate program and the pension fund contribution as proposed by Malloy.

But that’s not the end of the fiscal problems, if the projected revenue loss holds up.

Analysts use the April receipt totals to project future revenues. So if they reduce this year’s anticipated receipts by $290 million, they likely would reduce those for the next budget by some or all of that same amount.

With tax hikes off the table for both parties in a state election year, legislators would be forced to: find deep, last-minute spending cuts; spend the rest of the surplus to fill the gap in the next state budget; or both.

On Wednesday, Looney was ready to discuss only a possible reduction in the rebate.

The New Haven lawmaker said that offering a rebate of less than $50 doesn’t make much sense. It would be too small.

The more likely alternative, he added, would be to scale back the number of check recipients, though he didn’t offer any specific suggestions.

Malloy’s office did not make any comment immediately after Looney’s comments.

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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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