Eroding Revenues Deepen State Budget Deficits

State revenues continue to worsen, with the Office of Fiscal Analysis this week projecting a deficit of $266 million for this fiscal year and a gap of nearly $900 million for the next.
The red flags for OFA were estimated state income tax payments on Jan. 15 that were lower than projected—mainly for small business owners and wealthy residents.
Income tax projections have fallen by $464 million this fiscal year and $878 million in FY 2017.
Policymakers are nervously eyeing the income tax deadline of April 15 for indications of how actual revenues will come in this year.
The state and national economies continue to struggle, with Wall Street having a particularly difficult 2016 to date.
What’s more, the Great Recession battered Connecticut’s higher-paying job sectors and since then, the state’s economy has replaced many of them with lower-paying jobs.
Some, however, say that Connecticut’s outward migration of wealthier people also is part of the disappointing income tax estimates.

In his State of the State address, Governor Malloy cautioned that the state is experiencing “new economic realities” that must force Connecticut to change its fiscal ways.
As has the business community for many years, the governor called for state government to focus on its core responsibilities, take advantage of opportunities to save taxpayer dollars and better deliver services, and adopt zero-based budgeting.
The Connecticut Institute for the 21^st Century has released updated reports on expanding the use of regionalism to improve government services and reduce costs, as well as how to offer better long-term healthcare at lower cost.
“There has to be a heightened sense of urgency within the legislature to address budget gaps and spur greater economic growth,” said Joe Brennan, CBIA president and CEO.
For more information, contact CBIA’s Bonnie Stewart (860.944.8788) | @CBIAbonnie