Comptroller Kevin P. Lembo projected Monday that the current state budget is a modest $44.6 million in deficit.
Lembo’s forecast effectively matches the conclusion reached March 27 by the legislature’s nonpartisan Office of Fiscal Analysis, leaving Gov. Dannel P. Malloy’s administration alone in projecting finances in balance.
The comptroller cited concerns with both components of the state income tax: paycheck withholding and the quarterly payments that reflect capital gains and dividends earnings.
The single-largest revenue source within the state budget, the income tax was expected to yield $9.52 billion this fiscal year.
Analysts for the legislature and for Malloy downgraded expectations for the income tax by $81 million in a joint report in January.
But while legislative analysts predicted another $60 million in erosion in late February, the administration disagreed. It’s last estimate, issued March 20, held that finances are on pace for a $22 million surplus.
Lembo sided Monday with the Office of Fiscal Analysis.
“The withholding portion of the income tax, which accounts for over 60 percent of total income tax receipts, has been weakening in recent months,” Lembo wrote in a letter to Malloy. “In addition, estimated income tax payments through February were below last fiscal year’s receipts. The final income tax receipts will be available later in April. As in past fiscal years, it is likely that the final April payments will alter General Fund projections.”
“I would be happy to be wrong,” Lembo added.
Each of the competing forecasts represents a relatively small portion of the General Fund, ranging from 1/9th of 1 percent to 1/4th of 1 percent.
The comptroller also projects spending will exceed budgeted levels by $18.1 million, largely because of ongoing payments to settle the lawsuit the state employee unions filed in response to layoffs ordered illegally in late 2002 by then-Gov. John G. Rowland.
“We stand-by our projections and will continue to monitor revenue receipts and expenditure trends,” Chris McClure, spokesman for the governor’s budget office, said Monday. “The March projections are usually more noise than signal, as they lack information on April revenue collections and may over or understate the impact of expenditure trends. With that said, it’s worth noting that our respective projections differ by one-tenth of one percent.”
“Someone is wrong,’’ House Minority Leader Themis Klarides, R-Derby, said. “It is an ominous sign as we get into the real mechanics of putting together a budget for the next two years.’’
Klarides said “It is always dangerous to bank on a really strong April for income tax receipts to bail out the state,’’ adding that she hopes the governor turns out to be right in this matter.
Connecticut finished each of the past two fiscal years in deficit, reporting shortfalls of $113.2 million in 2014-15 and $170.4 million in 2015-16.