State Comptroller Expects $101.2 Million Deficit

The state comptroller expects the state will close the current fiscal year with a $101.2 million deficit.

Connecticut Comptroller Kevin Lembo wrote to Gov. Dannel P. Malloy that his projection represents a $40 million increase in the state Office of Policy Management's last deficit calculation "as a result of  lower estimated income tax income tax collections."

A "federal change in capital gains" affected income tax receipts for fiscal years 2013 and 2014.

"Taxpayers shifted gains that were likely to occur in Fiscal Year 2014 to Fiscal Year 2013 in order to take advantage of the lower tax rates in place at that time," Lembo's office said in a news release.

While estimated income tax payments grew 4.9 percent in comparison to last year and the Office of Policy and Management reports it is "anticipating a rebound," Lembo said he "is not confident that the level of anticipated increase will be attained."

“In the past, these payments through January have provided an indication of the size of estimated and final payment receipts that can be expected in April,” Lembo said. “The OPM projection relies on a 20-percent variance between January and April. An increase of this scope has not occurred in the last decade."

Lembo also expressed concern that "trading volume that generates taxable receipts has been declining" since the stock market began recovering in 2009.

"It appears that one cause is an aging demographic that has shifted to lower risk portfolios with less trading volume," Lembo said. "Complicating matters further, volume has been heaviest at lower points in the market cycle, thus reducing the amount of taxable capital gains. For these reasons, I have reduced my income tax estimate by $40 million this month. I remain hopeful that April receipts will outpace my current projection, but I believe it is reasonable to lower expectations at this time.”

However, he said he believes "that the OPM savings target for the General Fund that now totals $276.8 million is attainable."

“Over the past five fiscal years, annual realized lapses have averaged $511.2 million. Although the current lapse target is a significant challenge, it is not inconsistent with past performance in difficult budget circumstances," Lembo said. “It should be noted that in past years legislative action has been required in many instances to attain the required savings level.”

As for the next proposed two-year state budget, the state is bracing for another $55 million in proposed cuts after budget chief Benjamin Barnes announced last week he had made a mistake in crafting the governor's biennial budget due to an issue with a vendor that helped calculate the state's spending cap.The formula used factored in data from the 2008 recession era, which led to a discrepancy between the actual spending cap and the one factored into Malloy's budget, he said.

Contact Us