State Comptroller Nancy Wyman today said the state should consider using a portion of the $1.4 billion “rainy day fund” as part of a plan to address a budget imbalance that could reach $806.5 million by the end of the 2009 fiscal year.
The estimated deficit is composed of a current-year deficit of $302.4 million, plus a $504.1 million “structural” deficit caused by repeated use of past years’ surplus funds to pay for current expenses.
With no surplus funds remaining, Wyman said it would be appropriate to use the rainy day fund to reduce about half of the $806.5 million shortfall. The other half would be addressed by measures created by Gov. M. Jodi Rell and the General Assembly.
“The rainy day fund was established to ensure that in periods of economic hardship the state is not forced to increase taxes or implement other policies that would delay economic recovery,” Wyman said.
“Using a portion of the fund will allow the state to avoid major changes in its long-term policy objectives due to short-term economic conditions.”
Wyman noted that the current rate of overall revenue growth is about half the 4.5 percent annual average growth the state has experienced since the end of 2001 recession, and is expected to erode further. The state has lost 1,000 jobs in the first few months of the fiscal year, and unemployment is up sharply.
According to a statement from Wyman’s office, she has long questioned the practice of relying on prior years’ surplus funds to pay for current expenses. She maintains that practice is a main reason that the independent Office of Fiscal Analysis has projected budget deficits of roughly $1 billion for 2010 and 2011.
“Addressing this structural deficit now will not only reduce the shortfalls we are looking at in the next few years,” Wyman said, “but will put the state in a better position to react in the event of a steeper economic slide.”Â
Â
