Connecticut’s latest budget nightmare became reality on May 1st.
Analysts for Gov. Dannel P. Malloy’s administration and the legislature’s nonpartisan Office of Fiscal Analysis downgraded anticipated revenues for the next two fiscal years by $1.46 billion — nearly $600 million next fiscal year and $865 million in 2018-19 — largely because of eroding income tax receipts.
Projected revenues now fall $2.2 billion, or 11.3 percent, short of the funding needed to maintain current services in 2017-18. And with the potential deficit swelling to $2.7 billion, or 13.6 percent, in 2018-19, the biennial shortfall approaches $5 billion.
Further complicating matters, revenues for the current fiscal year are $413 million below anticipated levels. This pushes state finances more than $380 million in the red and threatens to deplete the $236 million in the emergency budget reserve with less than nine weeks remaining before June 30.
“The precipitous drop in revenue we experienced in late April creates major challenges for the state throughout the remainder of this fiscal year and into the next biennial budget we are currently working on,” Office of Policy and Management Secretary Ben Barnes, Malloy’s budget chief, said Monday (05/01). “We need to take immediate action to reduce spending between now and June 30 to reduce our current-year deficit as much as possible to prevent the need to borrow to meet expenses. We also need to develop new, additional approaches to further reduce spending in order to balance the budget for the years ahead.”
Barnes added that, “We cannot afford business as usual. Our current economic environment compels action and compromise.”
“Today is a devastating day for the state of Connecticut,” Sens. Len Fasano of North Haven and Kevin Witkos of Canton, the two highest-ranking GOP senators, said. “A nearly $5 billion historic deficit over a two-year period is staggering. For the past six years, Republicans have sounded the alarm. What we have to do now is change the state’s failing policies. Tomorrow the work begins.”
Income tax took the biggest hit
The income tax, the state’s largest revenue engine, saw the most erosion by far.
According to analysts, income tax receipts this fiscal year now are expected to total just under $9 billion. Not only is that well below the $9.44 billion analysts were anticipating just four months ago, but it falls short of the $9.2 billion collected last fiscal year.
Malloy noted Monday this report comes with some dangerous signs.
Income tax receipts are FOR READ MORE CLICK HERE