The state’s projected deficit for the current fiscal year increased 8 percent over the past month, as Office of Policy and Management forecasts for corporation tax revenue missed the mark in March and the first half of April.
OPM said Wednesday afternoon that it’s now projecting a $141.4 million deficit for the year ending June 30. That’s up from $130.8 million in March, which was up sharply from February’s $20 million estimate thanks to lower than expected collections of personal income taxes.
After lackluster collections over the past six weeks, OPM has lowered its corporation tax revenue forecast for the current year by $85 million. It also lowered its outlook for licenses, permits and fee revenue by $10 million.
The growing deficit comes in spite of a deficit mitigation plan passed by lawmakers in March, generating a net improvement of nearly $99 million over that month’s $130.8 million deficit estimate.
The higher shortfall is bad news for legislators, who are also grappling with a much larger projected shortfall in the coming year.
OPM Secretary Benjamin Barnes said in his monthly letter to Comptroller Kevin Lembo Wednesday that tax collections for the remainder of April will be a crucial factor in the final deficit number of fiscal year 2016.
Gov. Dannel Malloy, who released a new proposed budget earlier this month after two legislative committees released plans that failed to fully close next year’s projected deficit, said in a statement Wednesday that the growing deficit proves the state is in a “new economic reality.”
Malloy’s new budget, which leaned on hospitals and school funding and other Democratic priorities, rankled some of his party’s leadership.
“Today’s projections make clear that we can’t wait and hope that future revenue projections will save us from making tough decisions,” Malloy said. “We need to solve our whole fiscal problem, and not with band-aid solutions like using the Rainy Day Fund for next year’s problem.”
Senate Minority Leader Len Fasano (R-North Haven) and House Republican Leader Themis Klarides (R-Derby) said in a statement Wednesday evening that they are frustrated that some of their colleagues across the aisle seem to be counting on tax collections improving for the rest of April.
“This is also why we need to do more than cut and close the immediate deficit before us,” they said. “We also need to implement long-term structural changes to restore predictability and stability to our budget.”
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