Although Gov. Dannel Malloy’s proposed two-year budget has dominated this legislative session, state legislators might have to focus efforts on closing this year’s budget deficit.
State Comptroller Kevin Lembo, who will release his next set of projections on this fiscal year’s budget deficit tomorrow, previously predicted a deficit of $101 million on March 2. The nonpartisan Office of Fiscal Analysis overshadowed that projection last Wednesday, claiming that the state is expected to be in the red by $191 million. Should Lembo’s newest projections declare that the deficit is over 1 percent — approximately $175 million — of the total budget, state law requires that Malloy present the General Assembly with a deficit-mitigation plan.
In order to balance the budget, Office of Policy and Management Secretary Ben Barnes warned state agency heads in a letter last Wednesday to prepare for potential emergency spending cuts, following two rounds of cuts in November and January.
“I write to you today to re-emphasize that all spending, including hiring and overtime, contractual services and purchased commodities, be significantly curtailed,” Barnes wrote. “Savings in the state’s General Fund and Special Transportation Fund are of greatest importance, but agencies funded through other appropriated funds should also reduce expenditures where possible.”
However, Lembo said at a discussion hosted by the Yale College Democrats yesterday evening that his major budgetary concerns are not based on this fiscal year, noting that a $100 million deficit is relatively small compared to a $20 billion budget.
Instead, Lembo said that Malloy’s budget proposal for the next two fiscal years is more of a pressing issue.
“Some of the budget assumptions, particularly revenue assumptions … that led us to where we are now are baked in to the two-year budget,” Lembo said. “So if it’s a problem now, the likelihood that it’s going to continue to be a problem next year’s budget is high.”
Over the last month and a half, higher education officials, human services advocates and even the state Supreme Court have all spoken out over the cuts couched within the governor’s proposed budget, which has relied on spending cuts of over $1 billion to avoid tax hikes.
At a press conference last Thursday, Malloy said that in spite of deficit concerns for this fiscal year, which ends June 30, he does not anticipate the legislature will seriously consider tax hikes for the upcoming two years.
“Given the framework of the budget, I think when we get a budget back, it’s going to be largely like the one we sent, which is protective of the middle class here in Connecticut,” Malloy said.
Still, Lembo’s concerns with the budget echoed those expressed by lawmakers on both sides of the aisle.
Lembo cited a miscalculation, discovered less than a week after Malloy presented his budget to lawmakers in mid-February, that led to the budget briefly breaking the state spending cap, which then required lawmakers to cut an additional $60 million from that original proposal. Lembo also voiced concern with Medicaid shortfalls and a decreasing revenue stream.
At the Dems meeting, Lembo noted the volatility of Connecticut’s revenue stream, advocating for a greater emphasis on filling and enlarging the rainy day fund, which currently contains $519 million. The balance of the state’s rainy day fund is capped at 10 percent of net General Fund appropriations, although a Senate bill aims to raise that cap this legislative session in order to protect the budget during economic downturns. Lembo, who testified in front of the Appropriations Committee in favor of the bill last Friday, has also proposed legislation that would take excess revenue from Connecticut’s most volatile revenue sources — such as corporate taxes — and automatically deposit them into the fund.
Connecticut recently scored an ‘A’ on transparency in government spending, according to a report issued by the Connecticut Public Interest Research Group last Wednesday.