New Haven’s balance sheet is $1 million further in the debt thanks to a decrease in funding from the state.

The city’s general fund deficit for the 2012-2013 fiscal year, which ended this past July, now stands at $4.5 million. Earlier this year, New Haven administrators expected to receive significantly more from the state’s Municipal Revenue Sharing Program and adjusted the budget accordingly. Due to a technicality in Connecticut’s 2014-2015 budget, however, the statewide funds in the program dropped nearly 30 percent from last year’s total of $42.8 million. The last-minute change, which city officials discovered in August, added to the $3.5 million gap in the budget caused by a shortfall in the Board of Education.

“The cut was at the end of last fiscal year, so we ended up closing that fiscal year thinking we were going to have a 3.5 million deficit,” city Budget Director Joe Clerkin said. “[But] we ended up the year with a 4.5 million dollar deficit.”

To compensate for the budget hole, the city will draw $4.5 million from its rainy day fund, according to Clerkin. The fund, though, is already running low, having begun the year with a balance of $8.8 million. Clerkin said that despite the increased deficit, the $1 million loss would not lead to immediate cuts, as the funds had been marked for the previous fiscal year.

The Municipal Revenue Sharing Program transfers a small portion of state sales and real estate conveyance taxes to municipalities’ general funds. The totals are distributed to towns and cities based on population, wealth and tax-exempt manufacturing equipment.

The Connecticut Conference of Municipalities, a trade association for towns and cities throughout the state, is leading the effort to restore funding in Hartford. The group wrote a letter to Malloy shortly after the decrease was announced asking the state’s executive branch to restore the funding. Office of Policy and Management Secretary Benjamin Barnes, who oversees the governor’s budget proposals, told the group that the state did not have the legal authority to do so.

OPM has indicated willingness to work with municipalities to bring funding back to their previous levels, if not higher, CCM President Jim Finley said. At the urging of both OPM and the CCM, the state legislature plans to give the issue first priority when it next convenes in February.

“We are working with legislative leadership and the governor, specifically the Office of Policy and Management, to make sure that happens,” Finley said. “We’re hopeful that based upon commitment by the governor’s office, at least the $12.7 million will be put back in. That will provide a relief to [municipalities] in this fiscal year.”

Although the added $1 million to the deficit is a recent development, the city has been aware of the $3.5 million gap from the Board of Education since at least early August, when Garth Harries ’95 stepped into his new role as superintendent. Since then, New Haven’s schools have been forced to look for savings across their budgets.

Board of Education spokeswoman Abbe Smith said that the city has shuttered under-enrolled middle school classes at the Lincoln-Bassett School and MicroSociety Magnet School.

According to Clerkin, the New Haven’s budget outlook is improving despite the recent setbacks. Currently, he said, the city’s budget office projects a $4 million surplus for the 2013-2014 fiscal year. If the city is able to retain a surplus it will be used to replenish the rainy day fund.

The city received $2,381,831.84 from the Municipal Revenue Sharing Program program for the 2012-2013 fiscal year.