The state comptroller is estimating a $170 million deficit to the state's General Fund due to the coronavirus pandemic and said it will likely grow.
In addition to losses of income and sales tax revenue, his report says unemployment insurance claims in the state were up 630 percent, as of late March.
Comptroller Kevin Lembo said, “the ongoing and rapidly changing conditions will demand close monitoring and scrutiny in the coming weeks and months.”
“The speed and scale of the pandemic’s economic disruptions are unprecedented for Connecticut,” Lembo said in a statement. “As a result, the full extent of the impact is not yet clear and may take weeks, if not months, to determine. The current year deficit could, and likely will, grow larger. My office will continue to monitor the situation closely and update these projections in future reports.”
Lembo said his deficit projection is $111.4-million higher than the state Office of Policy and Management’s and reflects an updated analysis and estimate on the withholding portion of the income tax.
He is projecting a $130-million reduction in withholding revenue so far and a reduction in sales tax revenue by $30 million.
“My office is already seeing a drop-off in withholding receipts from the large number of layoffs and furloughs resulting from non-essential business closures related to the state’s response to the COVID-19 pandemic,” Lembo said in a statement. “In addition, we are reducing the sales tax estimate by $30 million, again due to coronavirus-related business closures and shelter-at-home directives.”
Lembo said that the state’s efforts to rebuild its Budget Reserve Fund in recent years is essential.
He said the state’s statutory revenue volatility cap, which requires revenue above a certain threshold to be transferred to the BRF – often referred to as the “rainy day fund” – is $3.3 billion for estimated and final income tax payments and revenue from the pass-through entity tax for Fiscal Year 2020.
The state will benefit from three federal emergency spending bills, including from the $2.2 trillion Coronavirus Aid, Relief, and Economic Security. Connecticut is projected to receive $2.36 billion in CARE Act funds, according to the comptroller.
Lembo said, due to job losses, sustained support will be needed, including expanded unemployment insurance and support for businesses, especially small and medium-sized businesses, to maintain jobs and keep employees on the payroll.
He also called for expanded Medicaid eligibility, health insurance coverage, paid leave and food assistance and increased aid for state and local governments, as well as for hospitals, other health care providers and first responders to deal with the ongoing public health crisis.
“The scope and suddenness of this crisis is without precedent in living memory,” Lembo said. “Therefore, relief needs to be provided quickly and be sustained over time to prevent even more harm, especially for those most in need. The recovery will be difficult and uneven. The biggest risk for policy makers is not doing too much, but rather doing too little in the face of these enormous challenges.”
Lembo said the state, as well as the nation saw a historic spike in initial unemployment insurance claims.
In Connecticut, the claims increased by 630 percent, from 3,440 to 25,098, for the week ending March 21.