State Comptroller Projects $207.8 Million Deficit

The state comptroller is projecting a deficit of more than $207 million for Connecticut for the fiscal year 2018, which would require the governor to submit a deficit mitigation plan, and legislative leaders plan to meet with Gov. Dannel Malloy Wednesday to talk about what comes next.

On Friday, Comptroller Kevin Lembo said he is projecting a deficit of $207.8 million for Fiscal Year 2018 and that amount triggers a state requirement that the governor submit a deficit mitigation plan to the legislature because it exceeds 1 percent of the state’s total net General Fund appropriations.

Senate President Pro Tempore Martin M. Looney (D-New Haven) released a statement after Lembo’s most recent budget estimate and said legislative leaders will meet with the governor Wednesday “to discuss potential next steps.”

House Republican Leader Themis Klarides called the projected deficit “serious.”

“The deficit was expected because the state’s budget policies over the years have been built on false assumptions, that increasing taxes will be sufficient to meet spending levels. The deficits are organic and an organic fix is required. Connecticut’s finances will likely continue to suffer because of the state employee union contracts that tie up nearly 40 percent of the state’s budget,’’ Klarides said in a statement.

She added that she and other Republicans have called for a special legislative session “to first address the cuts that have been made to health care programs for the elderly and disabled.”

“We have to set priorities and deal with the most pressing issue which is the cuts to the Medicare programs before they kick in Jan. 1,’’ Klarides said in a statement.

Nearly two weeks ago, Malloy's budget director said the current fiscal year was projected to be $202.8 million in deficit. At the time, Ben Barnes said that was slightly more than 1 percent of net appropriations in the state's main spending account, which was a threshold requiring Malloy to issue a deficit-mitigation plan.

In a letter to Malloy, Lembo reported a deficit that is slightly higher than a deficit reported last month by the Office of Policy and Management because he said he expects a larger $20-million deficiency in the state’s adjudicated claims account that is used to pay claims and attorney fees in the SEBAC v. Rowland settlement.

Lembo also cited uncertainty about the future of federal tax reform.

“Congress is considering significant modifications to federal tax law that could have profound implications for Connecticut, depending on what specific provisions, if any, are enacted,” Lembo said in a statement. “Future revenue forecasts will need to evaluate the consequences of any tax changes on the federal level.”

With seven months remaining in the fiscal year, $12.5 million has been spent from the adjudicated claims account in the SEBAC v. Rowland settlement and other issues, and the account has averaged $2.5 million per month in costs, according to Lembo, and he said he is projecting a $20-million deficiency in adjudicated claims that could go higher due to the unpredictable nature of the settlements involved.

“Another area of concern that will require close scrutiny is the aggressive level of savings included in the adopted budget,” Lembo said. “Achieving these lapse – or savings – targets will be a significant budgetary challenge, especially in light of the high levels of fixed costs for FY 2018, such as debt service payments, pension contributions and other costs.”

Lembo said Connecticut must also catch up to the national economy in economic growth.

“In recent years, Connecticut has not fully participated in the nation’s economic recovery,” Lembo said. “The national economy continues to exhibit growing signs of strength and resilience. However, Connecticut’s economy has experienced much more mixed results across a variety of key economic indicators.”

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