State Comptroller Kevin P. Lembo gave Gov. Dannel P. Malloy a big vote of fiscal confidence Monday, agreeing that Connecticut’s budget deficit is well below the emergency level.
The $89.4 million shortfall Lembo reported not only represents roughly half the amount that would compel Malloy to issue a deficit-mitigation plan, but also falls at least $80 million below the deficit projection of the legislature’s nonpartisan analysts.
“Based on current spending trends and with historical experience … over the past five fiscal years, I believe that the OPM (Office of Policy and Management) savings target is attainable,” the comptroller wrote in a statement.
The $89 million deficit Lembo certified Monday represents about one-half of 1 percent of this year’s general fund. And while that might seem small, state law requires the governor to submit a deficit-mitigation plan whenever the comptroller certifies a shortfall exceeding 1 percent of the general fund, which would be $174.6 million this year.
That’s because large portions of the annual budget cannot be cut quickly in any given year because of contractual obligations.
The Malloy administration’s last deficit forecast, issued Jan. 20, stood at $121 million. Shortly after that, the Democratic governor used his limited authority to order rescissions – reductions implemented without legislative approval – to cut spending by $31.6 million.
“Just like nearly 25 states around the country, we are dealing with our short-term budget issues responsibly,” Gian-Carl Casa, spokesman for the governor’s budget office, said Monday. “We will continue to make adjustments as necessary to keep the budget in balance. It’s that simple.”
Still, the prospect of a deficit-mitigation plan loomed larger one week ago when the legislature’s nonpartisan Office of Fiscal Analysis pegged this year’s shortfall much larger, at $202.5 million.
Even after applying the full effects of the governor’s emergency cuts, the deficit – according to OFA – would have stood at just under $171 million.
And on several past occasions, the administration’s rescissions haven’t reduced deficits by as much as the rescissions would indicate.
That’s because every state budget is balanced, in part, on “lapses” – assumed savings targets that agencies are expected to achieve throughout the fiscal year. And the governor’s emergency cuts often cancel at least some spending that agencies already had planned to suspend to achieve savings targets. When that happens, the governor rescinds spending that already effectively had been cut, saving the state nothing.
OFA hasn’t completed its analysis yet of the last round of rescissions.
But Lembo, a Democrat, concluded Monday that those rescissions avoided such duplication and lopped their full value of $31.6 million off the deficit.
The comptroller also disagreed with nonpartisan analysts that the executive branch would have trouble achieving its savings targets this year.
According to nonpartisan analysts, cost-overruns involving Medicaid and magnet schools are worse than the administration estimates. And a potential surplus in the debt service account is not as large as Malloy’s staff projects.
While the governor’s staff still expects agencies to save about $291 million this year, legislative analysts expect they will save about $60 million less.
And while hitting the administration’s savings target with five months left in the fiscal year “is a significant challenge,” Lembo added, “it is not inconsistent with past performance in difficult budget circumstances.”
In an interview with The Mirror on Monday, the comptroller added that while their continue to be positive economic signs, the state’s budget still faces many challenges and needs to be monitored closely.
“No one should see this as an all-clear sign,” Lembo said. “… We need to continue to watch spending, to continue to watch revenue as it comes it.”