State Budget Hole Deepens to $1.3 Billion–This Year Alone

Connecticut’s state budget crisis continues to deepen, with the deficit for this fiscal year expanding by $389 million in April to a new year-end projection of $1.3 billion, says the state comptroller.

Affected by the nearly 60,000 job losses in the state, year-end income tax payments (final and estimated) made in April were down about 40% compared with last year. Payroll taxes also dropped by about 14% for the month of April.

In this “historic shortfall,” said the comptroller, the impact of the recession was also evident in other tax-receipt categories, including:

• Sales taxes— down 24%
• Corporate taxes—down 22%
• Real estate conveyance taxes—down 52%
• Taxes on oil companies—down 64%

The shortfalls, based on a state budget of $18.4 billion, also mean the state is likely to pay out about 20% more this year in tax refunds than expected, according to the comptroller.

Plummeting tax receipts show how deeply the recession has hit Connecticut employers and their employees. Cautious consumers, families that have suffered job losses, and companies seeing less business are all factors in the lower tax revenue figures. Shrinking profits and weaker demand for products and services have forced companies to cut back on operations, spending, and sometimes payroll.

“Certainly the state’s fiscal problem is severe, but the overall economic crisis is being felt more acutely by the people of Connecticut,” says CBIA economist Pete Gioia. “Because of that, the state needs to address its fiscal problem in ways that will least exacerbate the economic crisis.”

As lawmakers grapple with a significant budget gap over the next two years, they also will have to work to balance this year’s books. CBIA continues to encourage them to streamline state government, reduce spending and avoid harmful tax increases.

For more information, contact CBIA’s Bonnie Stewart at 860-244-1925 or bonnie.stewart@cbia.com