In more bad financial news for the state, the legislature's nonpartisan fiscal office now says the state budget deficit has grown to a projected $144.5 million.
The Office of Fiscal Analysis released new numbers Wednesday night that say the state is spending more than expected and collecting less revenue than projected.
Only two months ago, the same office was estimating a surplus of about $100 million in an overall state budget of about $20 billion. But the state is not collecting tax money as quickly as expected, partly because Wall Street bonuses were lower than expected at Christmas. As a result, some major taxpayers in Fairfield County are not paying as much in taxes as originally hoped.
Overall, the state expects to collect $8.38 billion from the state income tax and $3.88 billion from the sales tax – the two biggest revenue generators by far. The tax on corporate profits is expected to generate $707 million in the current fiscal year, while another $444 million would be collected in cigarette taxes.
The income, sales, corporation and cigarette taxes were all increased last year by Gov. Dannel P. Malloyand the Democratic-controlled legislature in an attempt to close the state's budget deficit that started growing deeper with the collapse of the Lehman Brothers investment bank and the huge Wall Street downturn during the recession. The state economy remains sluggish as unemployment remains relatively high and real estate sales are far below the peak days of several years ago.
State officials are struggling to balance the budget through "lapses," which means that agencies are being ordered to spend less money than is allocated in their budgets. In other words, if an agency had a budget of $10 million, it might be ordered to spend only $9.5 million because of the difficult fiscal times and then essentially return $500,000 to the state.
"The budget is heavily reliant on budgeted lapses to achieve balance,'' the nonpartisan fiscal office said in a three-page summary. "Of the $777.9 million budgeted [for lapses], we have been able to identify $651.4 million in lapses. About five months remain in the fiscal year, and the remaining $126.5 million may still be achieved through various savings or budgeting mechanisms.''
The fiscal office noted that its projections were made before Malloy said this week that he was using his unilateral authority to make budget cuts of $78.7 million in order to keep the state in the black for the current fiscal year.
Republicans have complained that Malloy's strategy is flawed because he enacted the largest tax increase in Connecticut history and the state is still facing a deficit. Malloy has pledged that the state will finish the fiscal year on June 30 in the black.
Reprinted with permission of the Hartford Courant.
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