Despite significant improvement in the state’s fiscal health, Connecticut continues to face a budget shortfall.
A report released Thursday by Secretary of Policy and Management Ben Barnes and addressed to Comptroller Kevin Lembo projected a $26.9 million shortfall in Connecticut’s general fund for the 2013 fiscal year, citing the anemic national economic recovery as well as lackluster revenue from sales taxes and Indian gaming. Despite aggressive budgetary measures by the administration of Gov. Dannel Malloy — including achieving billions of dollars of savings in the form of tax cuts and state employee concessions — the state’s fiscal future remains tied to unpredictable national economic headwinds.
State Senate Majority Leader Martin Looney, a New Haven Democrat, described the current shortfall as “relatively minor” compared to 2011, when the state faced a deficit of over $3 billion.
“We’ve grappled with much greater budgetary problems,” Looney said.
Looney noted that the remaining shortfall will likely be “handled administratively,” with small cuts helping the state to balance its budget.
These would come in addition to $1.5 billion in higher taxes on income, sales, luxury goods and cigarettes, as well as $2 billion in union concessions already introduced to reduce shortfalls on the state’s 2011 and 2012 budgets.
Malloy’s budget for 2013 predicts a historically low spending growth rate of 2.6 percent, compared to last year’s actual spending increase of 5.2 percent. The budget also anticipates revenue growth of 3.1 percent.
But the state’s finances are not yet on sound footing, and the budget’s predictions may need to be further revised throughout the year.
“Although it’s early in the fiscal year, we are always monitoring spending trends and evaluating alternatives,” said Gian-Carl Casa, a spokesman for the Office of Policy and Management.
Slow levels of economic growth across the country are already generating concerns amongst state administrators.
“The revenue forecast that underlies the [fiscal year] 2013 budget assumes a modestly accelerating national expansion that is yet to materialize,” Barnes told CT News Junkie. He added that “gridlock and political brinkmanship at the national level” continue to lead to uncertainty in the state’s revenue forecast.
In his report, Barnes noted that the state is already experiencing an unexpected $100.0 million deficit in the Department of Social Services’ Medicaid accounts due to increasing caseloads in the Low Income Adults program, as well as increased use of medical services.
In an attempt to close the budget gap, Malloy’s office submitted an application to the Centers for Medicare and Medicaid Services, a federal agency, to impose an asset test on the program, according to Kathleen Kabara, a spokeswoman for the state’s Department of Social Services. The test would prevent those with assets over $10,000 from participating in the program, which provides medical assistance to those who otherwise could not afford it.
The test could cause as many as 13,000 residents to be removed from the program, according to CT News Junkie.
Kabara declined to speculate on the effect that such a test would have on Connecticut’s poor.
On Monday, Lembo will release further details on the state’s current fiscal health in a monthly report.
Looking ahead, Malloy already faces an estimated $423 million budget shortfall in 2014.