Faced with a widening budget deficit for this fiscal year, Gov. Malloy last week made further spending cuts to many state agencies and programs, and again asked the legislative and judicial branches to make voluntary cuts.

That’s because as revenues continue to decline and Medicaid spending rises, the Office of Policy and Management (OPM) newly forecast a budget gap of $121 million for fiscal year 2015. This is nearly $90 million higher than the previous deficit projection.

According to OPM, the biggest revenue drop was in the state’s petroleum gross receipts tax due to falling prices.

Yet the legislature’s Office of Fiscal Analysis believes the budget shortfall could be worse and would require the governor to submit a formal deficit mitigation plan.

Meanwhile, OPM Secretary Ben Barnes said the administration also was working out the next biennial state budget, which could be as much as $1.3 billion in the red.

Focus on spending

As the chart above shows, Connecticut’s budget continued budget crises are mainly based on a wide gap between expected revenues and planned spending.

Much can be done to narrow that gap. And Connecticut must balance the new, two-year state budget without further tax increases or borrowing, and within the state’s spending cap.

“These repeated, persistent shortfalls reinforce the need for the state to change its budget processes and fundamentally reform state spending to do more with less,” said Pete Gioia, CBIA economist and vice president.

Most important, the state needs to step up its efforts to make state government more effective and efficient in order to maximize tax receipts that often fluctuate with the economy.

Better to put state government on more solid and more affordable footing than put pressure on Connecticut taxpayers to make up the budget difference.

CBIA has recommended several reforms that could improve state government and help control state spending, such as:

  • Use zero-based budgeting throughout state government—that is, start each budget cycle afresh without simply accepting previous spending levels
  • Mandate state agencies to measure the results of state programs that cost more than     $1 million; continue to lean state agencies to make them more effective and efficient
  • Open bidding on state services that Connecticut’s private sector could perform as well as or better than state government

A healthier state fiscal condition will be a boon to the state’s economy—which in turn will more easily provide the revenues needed for critical state services and programs.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 | bonnie.stewart@cbia.com | @CBIAbonnie