Time is running out for lawmakers to close CT budget deficit

With 10 days left before Connecticut enters the final quarter of the fiscal year, the legislature still has not addressed a significant deficit that leaders pledged to tackle four months ago.

Meanwhile, a wary Gov. Dannel P. Malloy said he still expects the legislature will honor a new budget control it enacted last fall to help rebuild the state’s modest emergency reserves.

“I don’t think I have given up any hope, or all hope” that legislators will close the $192 million projected shortfall in the fiscal year that ends June 30, the governor told reporters on Monday. “I may be left with a little.”

But the governor also said legislative leaders professed commitment to both craft — and maintain — a new, bipartisan budget may be waning.

“The grand coalition seems to be fraying, and I think that’s what gives rise to the inability to respond to the budget being out of balance,” he said.

After a historic, nine-month debate, most Democrats and Republicans came together last October on a new, two-year plan to balance state finances.

Though Malloy — whose administration was excluded from the bipartisan negotiations that produced the deal — signed the budget to end the stalemate, he said the plan had significant flaws. Among them were a reliance on too many rosy assumptions, hundreds of millions of dollars swept from off-budget and one-time sources, as well as unprecedented savings targets the administration had to achieve after the budget was in force.

“We’re doing our part,” the governor said, adding that his budget office expects to achieve those savings targets.

Still, his administration reported on Nov. 20 — less than one month after adoption — that the first fiscal year of the two-year plan was $203 million in the hole.

Since then that gap has fluctuated, topping $240 million in late January before shrinking to $192 million now. But it always has exceeded a key threshold — 1 percent of the General Fund.

Whenever the comptroller confirms a deficit that exceeds that mark, the governor must issue a deficit-mitigation plan to the legislature within one month. Malloy delivered his plan on Dec. 13, almost three weeks before he it was due by law.

Connecticut got some good news in January when it learned that income tax payments connected to capital gains and other investment earnings topped expectations by about $675 million in late December and early January.

But state fiscal analysts have warned that some of those funds probably only are an early payment of funds taxpayers otherwise would pay to the state in April. In addition, a new revenue “volatility cap” lawmakers adopted last October requires the state to save nearly all of those extra December and January payments — $665 million out of the full $675 million — to bolster the emergency reserve.

When asked if he feared legislators would repeal the cap, or carve out a one-time exception and tap those funds to close the shortfall, Malloy said, “I don’t even anticipate they would do it.”

Legislative leaders from both parties pledged in December to begin tackling the budget deficit in January, right after the holidays. So where do things stand now?

“We continue to talk on a bipartisan basis on how to keep the current budget in balance as well as what adjustments are needed” for the fiscal year beginning July 1, said House Speaker Joe Aresimowicz, D-Berlin.

The governor’s budget office estimates the budget for the upcoming fiscal year is about $165 million out of balance. And if lawmakers reverse cuts scheduled to kick in July 1 to the Medicare Savings Program, which helps poor seniors and disabled patients cover prescription medication costs, the potential gap in the upcoming fiscal year swells to more than $250 million.

Adam Joseph, spokesman for the Senate Democratic Caucus, said only that legislative leaders had scheduled another budget meeting for Wednesday afternoon.

“We have had discussions with Democrats and our Senate colleagues about how and when to address the deficit and those discussions continue,’’ said House Minority Leader Themis Klarides, R-Derby.

The Senate Republican caucus did not comment for this story, but Senate Republican leader Len Fasano of North Haven has said his caucus is developing plans to close the shortfall.