Eroding income tax receipts have pushed the current state budget back into the red, nonpartisan analysts reported Monday.
More importantly, the $65.2 million shortfall the Office of Fiscal Analysis reported also reflects a potential hole of about the same size in each year of Gov. Dannel P. Malloy’s new biennial budget proposal.
That’s because the revenue schedules in the governor’s plan are based in part on estimated tax receipts for the current fiscal year.
“We are projecting a deficit of $65.2 million,” OFA wrote in its monthly budget forecast to legislators. “The major negative budgetary development since our projection of last month is a downward revision of $60 million to our estimates for Personal Income Tax collections.”
The shortfall is relatively small in the overall context of the budget, representing slightly more than one-third of 1 percent of the General Fund.
Still, it could signify a move back into the red for a budget that was plagued by small deficit forecasts throughout the fall and early winter months.
Lembo’s next forecast is due on March 1, while the administration’s next report is March 20.
The primary difference between those projections and those of nonpartisan analysts is the downward trend in income tax receipts.
Chris McClure, spokesman for the Office of Policy and Management — the governor’s budget office — noted that the different projections remain separated by a tiny fraction of the overall budget.
“Reasonable minds can differ” he said. “In this case, OFA and OPM can look at the same revenue data and draw different conclusions as to what that means for the remainder of the fiscal year. Nevertheless, we are discussing a difference of less than 0.5 percent of General Fund expenditures — an amount we can easily resolve in April for the next consensus revenue.”
“This drop directly correlates to six years of living under economic policies that don’t understand businesses or taxpayers,” said Senate Republican President Pro Tem Len Fasano of North Haven. “The path our state has followed has led to a decrease in economic growth and a lack of stable tax revenue, therefore resulting in deep and devastating cuts to social services. We must significantly change the direction of the state to bolster our economy so we can better invest in things like education, health care, and transportation and improve the lives of low and middle income families.”
The next revenue forecast the administration and nonpartisan analysts must issue jointly traditionally is recognized as the most important of the year.
Due to the General Assembly on April 30, it comes two weeks after the April 15 income tax reporting deadline and reflects the bulk of data from those filings.