State Comptroller Kevin Lembo announced today that spending reductions and transfers adopted by the legislature this week eliminate this fiscal year’s projected $220-million deficit. He’s concerned, though, revenues will continue to decline.
In a letter to Gov. Dannel P. Malloy, Lembo said there is continued risk of a downward trend in revenue and that it will be especially important to monitor the estimated and final payment tax collections in April.
“Specifically, while the withholding portion of the income tax showed solid growth in the month of March, it is still underperforming on a year-to-date basis. In addition, there has been some slippage in the sales tax trend, and national economic growth projections have moderated,” Lembo said.
The comptroller cited withholding receipts as one potential area of concern. He said they are the largest single source of state tax revenue, accounting for 61 percent of the total income tax receipts in fiscal 2015 and almost 40 percent of total General Fund tax receipts in that year. With the exception of tax increase spikes in fiscals 2011 and 2012, the current cycle of economic recovery has posted below normal withholding gains.
