The state budget ended its fiscal year with a $315.8 million deficit, State Comptroller Kevin Lembo said Friday. He attributes the deficit to reduced income tax revenues caused by global market volatility.
Lembo said the budget reserve fund currently holds a balance of $406 million, which at present appears sufficient to offset the general fund shortfall.
In his letter to Gov. Dannel P. Malloy, Lembo said he agrees with the Office of Policy and Management’s (OPM) latest deficit projection, which is an increase from $56.7 million from last month. The most significant single adjustment to the general fund this month was a reduction in projected income tax payments of $75 million.
Lembo said that volatility was driven in part by constriction in Chinese investment markets and Brexit, the vote for Great Britain to leave the European Union, which took place last week. He also said payroll-related tax gains were hampered by lower than anticipated labor market activity.
Lembo added that revenue projections fell during the year, but cost-cutting measures implemented by both the governor and legislative action reduced anticipating spending by $156.6 million.
