Emergency Cuts, Hiring Freeze Needed to Help Patch Budget Gap

Connecticut’s fiscal condition continues to be precarious amid new projections that the state could be facing as much as a $100 million budget deficit this fiscal year.

To help fill the gap, Gov. Malloy has made $47.8 million in emergency budget cuts, asked for about $7 million more in cuts from the legislative and judicial branches, and curtailed new hiring. 

According to the state’s Office of Fiscal Analysis, the gap in fiscal year 2015 is due to likely shortfalls in total state revenues, federal grants, and gaming revenues.

The governor’s cuts, which would cover more than half of the expected budget gap, came most heavily in social services and education, although many agencies were affected in some way.

Gov. Malloy has the authority to make budget cuts—called rescissions—of up to 5% of line items and 3% of any funds without having to obtain legislative approval.

He also called on state agencies to monitor overtime “very closely with consideration given to making reductions whenever possible.” 

Bigger Gap Ahead

Just ahead, however, is a much larger budget deficit. In fact, the first item of business awaiting lawmakers in the 2015 legislative session will be developing a new budget that solves another anticipated budget deficit of $1.3 billion gap for fiscal year 2016, and $1.4 billion in fiscal year 2017.

The governor’s budget director, Ben Barnes, said the next two-year budget will need cuts “significantly more aggressive than anything we could implement with rescissions now.”

However, he has said that the administration’s budget proposal won’t include any tax increases, and will “entail spending reductions below the current services level.”

CBIA vice president and economist Pete Gioia said, “We obviously need to move beyond patchwork solutions, with a strategic plan to do more with less spending.”

Get Economy Moving

News of the budget gap and the governor’s actions to address it are reminders to new and returning lawmakers that getting the state’s economy back on track can help pry Connecticut from what seems a chronic state of fiscal emergency.

A stronger economy will naturally produce more jobs and opportunities for the people of the state, more investment by businesses for expanding operations or workforces, and ultimately, higher tax revenues to pay for necessary programs and services.

Connecticut has a lot of work to do. As of now, the state’s economy is picking up steam, with the latest job numbers as evidence.

But Connecticut still has the largest tax burden per capita of any state as well as some of the highest levels of state spending and unfunded pension liabilities per capita—factors that tend to inhibit potential economic activity.

As they work to solve the latest budget challenges, the governor and Connecticut lawmakers will have to find ways to further stoke our economy, encourage job creation, and make sure that state government is running as lean and effectively as possible.

In other words, the really hard work is still ahead of us.

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