The state budget received its first official deficit reports Friday when nonpartisan legislative analysts and Gov. Dannel P. Malloy’s administration projected shortfalls ranging from $89 million to just under $100 million.
And while the administration issued the larger of the two deficit forecasts — $99.5 million — budget director Benjamin Barnes, insisted it quickly would be closed, and reasserted Malloy’s insistence that tax hikes are not an option.
“This is consistent with what the administration has been saying,” Barnes said, “that no matter what the projections are, we will manage and administer the budget so that there will be no deficit. It is important to remember that this is a prediction of what would happen now and in the future should we do nothing — and doing nothing is not an option.”
More than half of the deficits projected both by the governor’s staff and by the legislature’s nonpartisan Office of Fiscal Analysis stems from declining revenues, particularly involving receipts from Indian casinos and federal grants.
Both agencies also acknowledged that “deficiencies” — potential cost overruns in various state departments — are on pace to exceed any departmental surpluses.
Nonpartisan analysts concluded overall spending is running about $30 million in the red, driven in part by cost overruns in social services and in accounts to cover health care benefits for retired state employees.
The administration also cited overspending in social services, as well as overtime costs among state police, increased caseloads among public defenders and miscellaneous costs in the comptroller’s office.
Each deficit projection represents roughly one-half of 1 percent of the general fund, which comprises the bulk of the state’s $19 billion operating budget. They also fall about $75 million to $85 million shy of the 1 percent mark — a threshold in state law which would compel the governor to submit a deficit-reduction plan to the legislature.
Both new forecasts were included in the respective agencies’ Fiscal Accountability Reports — extensive analyses of a host of short- and long-term budget issues. Both offices must submit this report to the legislature annually on Nov. 15 in preparation for the upcoming General Assembly session.
After spending months rejecting the likelihood of a deficit this year, Malloy conceded Thursday there was red ink to clean up when his budget office told agencies the governor would order emergency budget cuts later this month.
The governor also froze all-but-critical hiring across the Executive Branch, a move that raised concerns among state employee unions.
And Barnes said Friday that “raising taxes is not an option. Any budget issues will be resolved by prudent decision-making and difficult choices, should they be necessary.”
Malloy insisted repeatedly during the just-completed gubernatorial campaign that “there’s not going to be a deficit” – a statement based on legal and fiscal semantics.
State law prohibits governors and legislatures from proposing or adopting unbalanced budgets. And if the comptroller anticipates a deficit after the fiscal year has begun, it must be resolved before the books are closed – even if it takes borrowing.
In other words, under the governor’s definition, a budget deficit is legally impossible in Connecticut. Only a deficit projection can occur.
The Democratic governor’s Republican critics frequently have accused him of taking advantage of the public – and the media’s – misconceptions about state finances.
Senator Len Fasano, R-North Haven, the new minority leader, charged the governor Friday with playing games in reporting Connecticut’s finances.
“Things were rosy before the election, and now all of a sudden we have a problem? The timing of these announcements raises serious questions. It doesn’t pass the smell test,” Fasano said.
Rep. Themis Klarides, R-Derby, said administration officials have ignored nonpartisan warnings about fiscal red ink for the past year, including a warning last spring that the budget lacked funds necessary to cover retiree health care costs. “They (Malloy officials) don’t notice it until they notice it.”
Democrats have responded that as Connecticut has recovered from the Great Recession, GOP lawmakers either have declined to offer budget solutions, or have offered packages laden with false cuts and fiscal gimmicks.