Reversing a recent trend of state budget surpluses, Connecticut Gov. M. Jodi Rell announced Thursday that the state is looking at a budget deficit of over $1 billion for the 2005-2006 fiscal year.

Connecticut had projected budget surpluses estimated at $300 and $185 million for the 2003-2004 and 2004-2005 fiscal years, respectively, but Rell said these surpluses relied on the use of one-time revenue sources, like property sales. A projected decrease in such sources, coupled with increased costs, will cause next year’s shortfall. Part of the cost increase in next year’s state budget is a $90 million increase in aid to Connecticut cities and towns.

Rell said she has not yet made any decisions about how to manage the deficit, but she said large cuts in spending will likely be necessary. Rell will present her budget to the legislature in February. The Connecticut General Assembly’s Appropriations Committee is meeting today to discuss potential deficit solutions.

“The budget process has started for the next fiscal year, and to address the gap all of the state agencies are submitting their plans and projections and their budget requests,” Rell spokesman Dennis Schain said. “The governor is developing her plan to address the situation.”

Ward 27 Alderman Philip Voigt, chairman of the Board of Aldermen’s Finance Committee, said it is difficult to predict what effect the deficit will have until lawmakers decide where to cut spending, but New Haven is likely to suffer from any potential cuts.

“I’m sure that it wouldn’t bode too well for cities like New Haven that rely a lot on state aid because our tax base is so small with the large population that we do have,” Voigt said.

New Haven is also currently coping with a projected city budget deficit for this fiscal year.

State Rep. Bill Dyson, co-chairman of the Appropriations Committee, said the state will have to make cuts that are likely to come from big spending areas like human services, including Medicaid, and personnel.

“Obviously, it’s a serious matter,” said Dyson, who represents New Haven. “It’s going to require some drastic action. [Budget deficits] have usually resulted in hard times in the past. A billion dollars is out of the ordinary, but in terms of our being able to deal with it, I think we can.”

One proposal to alleviate part of the budget deficit is levying a new tax on Connecticut’s millionaires, an idea that has previously been unsuccessfully proposed by Democrats in the legislature. Dyson said such a tax would only be a partial solution since it would only bring in about $500 million, still leaving a $500 million deficit.

Ward 1 Alderman Ben Healey ’04, who represents most of the Yale campus, said he believes the state legislature should raise taxes to limit cuts in spending.

“One can hope, and I don’t know whether this will play out, that a more powerful and determined and progressive state legislature would be willing to find the revenues that the state needs to fund the services our citizens require,” Healey said.

The budget surpluses from this fiscal year and the year before will be placed in a “rainy day fund” until the government decides what to do with the money, Schain said.