New Report Highlights Pandemic’s Impact on State Budget
A new report from the legislature’s nonpartisan Office of Fiscal Analysis highlights the economic impact the COVID-19 pandemic has already had on Connecticut’s budget outlook.
According to the March 25 report, OFA projects a $178.2 million deficit for the current fiscal year, up $88.1 million from previous estimates.
The state’s Special Transportation Fund, originally projected at a $5.1 million surplus, is now projected to run a $23.8 million deficit.
According to the report, revenue adjustments are partially a reflection of downgrades in growth assumptions and the impact of temporary policy decisions to shutter bars, restaurants, and casinos.
OFA also highlights a Moody’s Analytics report that the United States is in a recession that will get worse over the next few months.
A prior OFA report estimated that $3 billion would be needed to cover lost revenue over two fiscal years in a typical recession.
Forgone revenue growth in a typical recession would be $1.5 billion, meaning the state’s General Fund could face an additional structural deficit of $1.5 billion after a typical recession has run its course.
While the pandemic’s economic impact on the state is starting to add up, the next scheduled consensus revenue estimate may not provide a clear picture.
The extension of several tax deadlines will make data collection more difficult.
OFA anticipates “major downward revisions to state revenue projections” for the next fiscal year and beyond.
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