How big of a deficit is the state budget on pace for less than a month after it was adopted?

How big of a deficit is the state budget on pace for less than a month after it was adopted?

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The newly passed budget is on pace for a $178 million deficit less than a month after the legislature adopted it, Gov. Dannel P. Malloy’s budget office reported Monday. 

 “The governor’s caution regarding our ability to get through (fiscal year 2018) in balance under the bipartisan budget passed by the General Assembly was well-warranted,” Office of Policy and Management Secretary Benjamin Barnes said in a statement.

Barnes’ projection for the budget came after OPM and the Office of Fiscal Analysis, the legislature’s nonpartisan fiscal analysts, released their revised consensus revenue figures Monday. State statute requires the two agencies to update their consensus revenue projections in November, and again in January and April. 

Barnes said the revised revenue expectations put the bipartisan budget, which the legislature approved late last month, on course for a $178.4-million shortfall this year, followed by a $147.1-million budget hole next fiscal year.

Barnes also noted the deficit comes before OPM has had the chance to evaluate the budget for possible shortfalls caused from expenditures, such as lapses, spending cuts, or other savings goals that might be unattainable. His monthly letter to Comptroller Kevin Lembo isn’t due until Nov. 20. 

“OPM will finalize our projection in our letter to the Comptroller next week, and the administration will continue to do its part to monitor revenues and expenditures closely,” Barnes said in his statement.

OPM and OFA revised their revenue projections downward by a combined $490.5 million over the next two fiscal years, including a reduction of roughly $65 million each year in sales tax revenues. Sales tax projections were lowered by roughly $34 million each year, and the two agencies forecasted the loss of slightly more than $140 million annually. 

The losses were partially offset by expenditure reductions — $48.6 million this year, and $116.7 million next fiscal year. 

Those projections do not include Malloy’s concerns about potential losses to the hospital tax, which the legislature address by adopted new language this week. The Senate approved the changes Tuesday, while the House ratified the alterations Wednesday. 

The changes came an agreement with the Connecticut Hospital Association and Malloy, who expressed concern that the state was poised for a $1 billion budget shortfall without the change. Malloy was concerned federal Centers for Medicare and Medicaid Services wouldn’t accept the language for an increase the hospital tax — up 2 percent to 8 percent — but would leave the state on the hook for supplemental payments back to the hospitals.

“The final language that was delivered to the Governor’s desk today is a positive development that will enable the administration to proceed without delay in our amended submission to CMS,” Kelly Donelly, a spokeswoman for Malloy, said in a statement. “We are grateful for the leadership in the House and Senate for recognizing Gov. Malloy’s concerns about the flawed hospital supplemental payment and provider tax language that was included in the adopted budget bill, and their agreement to quickly come in and rectify it to make the law workable.”

Prior to the changes, Malloy had warned that the flaws would have resulted in a budget deficit of $1 billion over the next two years.


Twitter: @reporter_savino

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