A gradually improving state economy is generating higher tax revenues, but just one quarter into this fiscal year, Connecticut is already facing a $45.3 million budget deficit, according to the state comptroller. To close the gap, Gov. Rell has told most state agencies to expect their allotments to be cut for the second quarter of the fiscal year (Oct. 1-Dec. 31).
The governor has executive authority to cut up to 5% of certain state budgets without legislative approval. While the economic news is starting to brighten and the current year’s deficit is relatively small compared with recent years’, Connecticut’s fiscal situation is still precarious.
This year’s $19.2 billion budget is propped up with a patchwork of borrowing, federal aid, payment deferrals, and some spending cuts. Stimulus help is now evaporating and fears are growing that cuts in federal aid to the state may be next. What’s more, an overreliance on borrowing to make the budget ends meet is jeopardizing Connecticut’s bond ratings.
Minus the one-time help, the budget gap widens: Connecticut faces projected deficits of more than $3 billion in each of the next two fiscal years, and the next legislature and new governor will have to face this serious challenge starting in January.
“We are far from out of the woods,” says CBIA economist Pete Gioia. “The economic recovery is still fragile. The state must curtail overspending and eliminate current-year deficits as soon as possible.”
Revenue in the state’s two largest tax categories--the income and sales taxes--have exceeded expectations by $198 million since the 2011 fiscal year began July 1.
On the other hand, some agencies are failing to make budget-savings targets, such as the Department of Social Services, which has overspent by $140 million.
Voters are nervous about the state’s fiscal condition. By a 2-to-1 margin, Connecticut voters responding to a summer public opinion poll commissioned by CBIA said that state government should “cut spending and do better with the money [it] already has,” versus “find new ways to generate revenue.”
For more information, contact CBIA’s Pete Gioia at 860.244.1945 or firstname.lastname@example.org. -- Dave Conrad
Dave Conrad is a CBIA writer/editor. He maybe reached at email@example.com.