A steep drop in gas prices has created an estimated $100 million additional revenue shortfall in Connecticut's state budget for this fiscal year.
State officials thought the state's petroleum wholesale tax was going to raise more this year than the $340.7 million it generated the year before. But at least a third of the expected revenue is gone because of the falling gas prices.
The average price of a gallon of regular gas in Connecticut has dropped from an all-time high of $4.39 on July 7 to $1.98 on Monday, according to AAA.
State Comptroller Nancy Wyman on Monday increased her deficit estimate for the current year to $338 million. The wholesale tax, called the Petroleum Products Gross Receipts Tax, is imposed whenever petroleum products, including gas, jet fuel and kerosene, are sold. It is separate from the retail tax of 25 cents a gallon that consumers pay.
Arthur Wright, an emeritus professor of economics at the University of Connecticut, has studied the wholesale tax.
"The state, by having this tax, became a speculator in the oil market," he said. "Somebody budgeted wrong. Somebody guessed wrong about oil prices. And this is an example of how an investor gets burned."
Adding to the revenue problem, the legislature and Gov. M. Jodi Rell earlier this year decided to postpone a planned increase in the wholesale tax, from 7 percent to 7.5 percent.
The move was intended to give motorists a break at the pumps and cost the state an estimated $35 million in additional income for this year's budget. Industry officials said postponing the tax increase saved consumers 3 cents a gallon.
State Rep. Art Feltman, D-Hartford, was the only lawmaker to oppose the tax increase postponement.
"People are now suffering, people who need shelter, medicine, food, health care, and we're just going to have to turn them away because we gave away our ability to tax," said Feltman, who did not seek re-election. "We're facing a deficit, and we reduced the gas tax which, as we now know, wasn't needed."
Rep. Denise Merrill, D-Mansfield, said legislators had no way of knowing that gas prices would plunge when they delayed the tax increase.
"You would've had to have a crystal ball," said Merrill, who will be majority leader in the regular session that starts next month.
State lawmakers met last week and reduced the deficit for this fiscal year, which ends next June 30, by $300 million. But officials said the current $18 billion budget still has a deficit of at least $250 million, and the revenue shortfall for the next two years is estimated at $6 billion.
