A projected shortfall of more than $100 million in revenue is expected to push the state’s current year budget in the red, according to state officials.
Comptroller Kevin Lembo on Monday announced the state’s fiscal 2020 budget faces a $31.6 million deficit based on new revenue forecasts for November.
Lembo in a letter to Gov. Ned Lamont said the update reflects a revenue forecast reduction of $84.5 million by the state Office of Policy and Management (OPM) and the legislature’s nonpartisan Office of Fiscal Analysis (OFA). It also represents a $24-million deficit projected in the state’s fringe benefit accounts due, in part, to fewer than anticipated retirements.
Other adjustments include a $100-million increase in tax refunds thanks to larger-than-expected refunds for the income tax and the pass-through entity (PE) tax credit, and a $20.7-million reduction in revenue from the new 10-cent fee on plastic bags.
Legislators and the governor projected that the fee on plastic bags would generate about $27.7 million this fiscal year, but recent reports now estimate the state’s take at $7 million.
Meantime, the sales and use tax performed better than expected as revenue projections increased by almost $40 million, Lembo said.
After accounting for the deficit, the state’s year-end budget reserve fund (BRF), or so-called “rainy day fund,” would stand at $2.79 billion. The fund current stands at $2.5 billion.
“In order to help protect against future economic downturns, Connecticut must maintain financial discipline and continue building the BRF balance to the statutory target of 15 percent,” Lembo said. “Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies.”
Still, the latest projections by OPM, Lamont’s budget office, and OFA does open Lamont to some criticism.
Lamont and Democratic lawmakers assumed the two-year, $43 billion state budget they adopted in June would run well in the black, in part because of aggressive assumptions about income tax revenues that haven’t materialized.
A national poll released Monday by CNBC found two-thirds of Americans surveyed believe the U.S. economy will enter a recession within the next year.
Connecticut was one of the last states to emerge from the Great Recession in early 2010. It struggled for several years with a recovery that lagged most other states’ and still has not recovered all jobs lost since the last economic downturn.
Still, state tax receipts generally have been on the rise for the past two years, and the new report showed most taxes and other revenue sources holding strong.
A CT Mirror report was used in this story
