Ben Barnes, the governor's budget chief, in June after telling agency heads the state would defer raises for non-union managers.
Ben Barnes, the governor's budget chief, in June after telling agency heads the state would defer raises for non-union managers. CTMirror File Photo
Ben Barnes, the governor's budget chief, in June after telling agency heads the state would defer raises for non-union managers.
Benjamin Barnes, the governor’s budget chief. CTMirror File Photo
Benjamin Barnes, the governor’s budget chief. CTMirror File Photo

Gov. Dannel P. Malloy and the legislature face more than $600 million in red ink this fiscal year and next combined — and another shortfall close to $1.4 billion after the next state election — if new revenue estimates released Tuesday are correct.

That means the financial problems facing the Capitol over the next few years are roughly five times the size of Connecticut’s modest $406 million emergency reserve.

And this grim news comes just five months after the governor and legislature enacted a new two-year budget that raises taxes by $1.3 billion over the biennium, and also cancels previously approved tax cuts worth close to $500 million.

Malloy’s budget office and the legislature’s nonpartisan Office of Fiscal Analysis released an updated consensus projection showing general fund revenues next fiscal year are $402 million below the level built into the 2016-17 state budget.

That gap, coupled with the $246 million deficit nonpartisan analysts project for the current fiscal year, leaves legislators with a considerable challenge when they return to the Capitol, either for a special session later this year or once the 2016 regular session begins on Feb. 3.

Legislative leaders from both parties have been meeting for the past two weeks with the governor and his staff to search for spending cuts.

Officials have known since late June that a much larger problem looms in the first new budget the legislature and governor must craft after the November 2016 state elections.

Nonpartisan analysts projected last summer that there was a $927 million hole built into the 2017-18 fiscal year.

Further complicating matters, analysts for the legislature and governor agreed Tuesday to downgrade expected general fund revenues in 2017-18 by another $445 million.

That would push the post-election deficit to almost $1.4 billion.

And if a new plan by Malloy and the state Teachers Retirement Board is implemented, Connecticut also would owe an extra $180 million in pension contributions in 2017-18, potentially pushing that deficit over $1.55 billion.

Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, has been warning legislators since September that state tax receipts aren’t meeting expectations.

The income tax has been particularly problematic, involving receipts both from investment-related earnings and regular paycheck withholding.

“We’ve always known when there’s weakness in the revenue, if it lowers your base this year, it often becomes even more challenging in the next few years,” Barnes said.

But the budget director quickly added that Connecticut’s economy is still growing — albeit not the at the pace state officials would like.

“These numbers give further proof that the state’s fiscal health has continued to erode and that significant changes are warranted to address the ever increasing deficit we face,” House Minority Leader Themis Klarides, R-Derby, said. “The budget was out of balance when it was passed and revenues will only continue to fall short of expenses.”

“We need to make the right spending cuts now.’’

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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