CT's Budget Deficit Grew Even Larger Than Anticipated

HARTFORD, CT- The Office of Policy and Management is projecting a $315 million budget deficit for fiscal 2015-16, which ends June 30.

And making matters worse is that the deficit is up another $56.7 million from the estimate provided just last month, top state officials said Monday.

It is attributed mainly to continued weakness in income tax collections, officials said. This news comes after lawmakers recently approved more than $900 million reductions to next year's budget, which begins July 1.

Existing laws mandate that the projected deficit would be eliminated via transfer from the Budget Reserve Fund by June 30 as part of the process of closing out the fiscal year, and would reduce the current $406 million budget in the Reserve Fund to $90.2 million, or just 0.5 percent of next year’s adopted budget.

“As we hold down spending across state government, revenues are around $600 million lower than Democrats, Republicans, and non-partisan analysts projected when the fiscal year began," said Secretary Ben Barnes in a statement. "We’re facing a sustained period of slower-than-normal growth as we adjust to this new economic reality. OPM projects that the State will need to use the Rainy Day Fund to offset the revenue shortfall, leaving less than $100 million remaining. We are committed to making difficult choices to reduce spending throughout the end of this fiscal year and into the next.”

The release from Barnes' office revealed that projected revenues are revised downward by $43.2 million compared to last month’s estimate. Personal Income Tax is reportedly down $75 million, while the Sales and Use Tax has been revised downward by $28.2 million as collections continue to diverge from expected targets.

Federal Grant revenue, meanwhile, is increased by $50 million to reflect federal funds drawn down this fiscal year. All other changes net to a positive $10 million.

Expenditures are expected to be $156.6 million below the originally adopted budget plan. This results in a change of $13.5 million from last month’s estimate.

The release also included an analysis of the Special Transportation Fund due to its significant nature, which will end the year with an operating deficit of $26.8 million. This is an increase of $7.5 million over last month’s projection.

Transportation Fund revenues are being revised down by $15.2 million compared to last month's estimate. Partially offsetting revenue changes is a $7.7 million improvement in projected spending, including a $4 million decrease in debt service requirements.

The fund balance on June 30 is estimated to be $153.2 million. Though these numbers represent the best forecast that can be made at this time, the release also emphasized that adjustments may be needed as the fiscal year concludes and the year-end closing process commences.