Facing a rising budget deficit, Connecticut will soon be forced to draft plans for reduced spending.
Last week, the Malloy administration confirmed the state is looking at a $365 million budget deficit this fiscal year. Under Connecticut law, the governor must submit a cost-cutting plan to the legislature whenever a budget deficit exceeds 1 percent of the nearly $20 billion state budget, and the current projected deficit is nearly double that amount. The Malloy administration has said that it will likely submit its proposal sometime in the next few weeks.
The governor faces certain limitations in what he can propose to cut, said Gian-Carl Casa, undersecretary for legislative affairs in the state’s Office of Policy and Management. For example, he cannot cut municipal aid or more than 5 percent of funding on any particular budget line item. Malloy can choose to include legislative items in his plan — such as proposing to cut entire programs — though any legislative item would be decided by a vote during a special session. Adam Joseph, a spokesman for the State Senate Democrats, said that such a session would most likely be held before Christmas.
“The longer we wait, the more money is spent,” Joseph said. “We want to make sure we’re turning off the faucet as soon as we can.”
Malloy has repeatedly stated that he does not plan to include any tax increases in his deficit-reduction plan, as the state raised taxes in its last biannual budget. Joseph declined to speculate whether Senate Democrats would challenge the governor’s stance on taxes, though he said the governor’s position is “clear.”
Senate Majority Leader Martin Looney declined to speculate on specific programs Senate Democrats would support cutting.
“That all remains to be seen,” Looney said. “It would be premature to speculate what might or might not be cut until we see what the governor’s proposal is.”
In his monthly report released in November, Office of Policy and Management Secretary Ben Barns said the deficit was likely due to overly optimistic tax revenue estimates and higher-than-expected enrollment in Medicaid, the federal health care program for low-income Americans.
Revenues are down about $144.9 million from last month. Casa attributed the shortfall to a “sluggish national economy.”
“We believed the national economy would recover as it had in the past,” Casa said. “If the recovery had occurred at the same rate as the recovery from the 2002-’03 recession, revenue from income taxes would be $650 million higher and sales tax revenue would be $75 million higher.”
According to the legislature’s Office of Fiscal Analysis, the Medicaid shortfall can also be attributed to the growth in caseloads. The Medicaid program for adults has surged by 4,000 clients since June, adding $30 million in expenditures. Overall, $240 million in excess spending results from Medicaid outlays, according to the Office of Fiscal Analysis.
Both the shortfall in tax revenues and the increased client roll on Medicaid can be attributed to the state’s lackluster economy, Casa said. The state’s unemployment rate, which stood at 9 percent in October, tops the national rate by over a percentage point. Additionally, the state created 1,900 jobs in the past year, a figure State Comptroller Kevin Lembo called “scant” in a letter to the governor.
A spokesman for the Senate Republicans could not be reached for comment.
The state legislature will negotiate a new two-year budget plan in its next session, starting in January.