Connecticut’s Billion Dollar Budget Deficit Explodes Again

Connecticut is heading toward the worst drop in tax collections since the Great Recession, which will further increase the state budget gap and make solving the issue increasingly difficult. Earlier this week it was learned that income tax revenue was hundreds of millions of dollars below estimates, but that number has now ballooned to a $450 million shortfall.

The shortfall will add $1.1 billion to the biennial budget deficit on top of the $3.6 billion deficit, according to the CT Mirror. It will likely mean that Connecticut will deplete its emergency reserve fund, end the fiscal year in a deficit and have to borrow money to cover operating costs. The final number should come in within the next few days.

Legislative Republicans released their budget proposal Thursday, but like legislative Democrats and Gov. Dannel Malloy’s budget was based on tax collection estimates from January.

Republicans said their budget highlights include:

• No tax increases outside of the elimination of the property tax credit for everyone except the elderly and those with dependents. Malloy’s budget proposal eliminated the credit for everyone.
• Rejects increased cigarette tax, hospital real estate tax and gun permit fee increase.
• Doesn't require towns to assume 1/3rd of teacher pension costs.
• Almost all towns would fare better for municipal aid than Malloy's plan.
• Require state agencies to have no more than one deputy commissioner and executive secretary.
• Eliminate Connecticut’s Citizen Election Program.

State Senate Republican President Pro Tempore Len Fasano said that the Republican proposal has unanimous consent among the Republican house and senate caucuses.

“Since 2011 we are losing revenue, we are losing people, we are losing jobs, credibility, the ability to borrow, it’s sad,” he said at a Thursday afternoon press conference.

He acknowledged that the Republican proposal was based on revenue estimates that are now off by hundreds of millions of dollars, but said it is a good “spinal cord” of what the budget should represent.

Democrats criticized the Republican budget and said it had $144 million in tax increases for the first year.

“At first glance, the Republican budget appears ostensibly responsible; however, a closer examination proves that not to be the case,” said Senate President Pro Tempore Martin M. Looney (D-New Haven).

Democrat leadership said in a statement that the elimination of the property tax credit for many filers, cutting the Earned Income Tax Credit to 25 percent of federal EITC and ending the car tax restriction on towns with mill rates greater than 37 amount to tax increases.

The Democrat legislative proposal called for a 5.2-percent spending increase next fiscal year and 1.8 percent for the following year. It didn’t make it to a vote earlier this week.

Republicans fired back about accusations that the budget included tax increases.

The Republican proposal also puts forth its own educational cost sharing formula which would give more money to towns than Malloy’s proposal.

Long-term goals for Republicans include:

• Require legislative vote on all state union contracts.
• Enact a constitutional spending cap.
• Enact a Constitutional Transportation Lockbox
• Enact a $2 billion Cap on Bond allocations and issuances (phase in the cap on issuances over a two year period)
• Close CJTS and transfers services to judicial/community placements
• Encourage Urban Economic Growth with implementation of the 7/7 Brownfield Redevelopment Program
• Remove Barriers to Regionalization
• Medicaid Oversight
• Apply “Results First” to all Grant Programs
• Creates a “Citizens in Need” Account
• Requires UConn Health Center to Seek Private Partnerships
• Competitively bids the Correctional Managed Healthcare Contract

Image via Lisa Jacobs/Flickr Commons