State Budget Statistics: Good In Short-Term, Tougher for Next Two Years On Taxes

by Categorized: 2014 Election, Democrats, Gov. Dannel Malloy Date:

State officials received both good and bad news Tuesday from the latest budget figures: a one-time spike in tax collections for the current fiscal year but expectations of tougher times over the next two years.

The latest numbers show that the state is projecting a surplus of $212 million in the general fund in the fiscal year that ends on June 30. One of the key reasons is that rich families, particularly in Fairfield County, made major financial moves because of federal tax increases in three areas: income, gifts and capital gains.

When individuals made large taxable gifts late in the 2012 calendar year because of concerns about impending federal tax law changes, the state collected increased revenue in gift taxes, officials said. In the same way, the state collected about $110 million more in personal income taxes because of late-year moves to sell stocks in 2012 before tax changes.

\”These increases are one-time in nature, based on individuals taking capital gains and dividend income, or transferring assets, in advance of tax law changes that took effect on January 1,\’\’ said a statement from Gov. Dannel P. Malloy\’s budget office. \”The projections for [the next two fiscal years] reflect the consensus view that these revenues will not recur and that some of the revenue this year will in fact reduce revenue in the coming year.\’\’

With those reductions on the horizon, the expectations for the next two years are more grim. As such, the state is expecting to collect about $500 million less over the next two years than expected.

\”These are conservative projections,\’\’ said Ben Barnes, the governor\’s budget director. He noted that the legislature\’s non-partisan fiscal office and the governor\’s budget office \”are in agreement that we should not expect the revenues realized this past month to continue based on the underlying national economy.\’\’

The statistics are changing now because of millions of dollars received from the April 15 tax collections. Some wealthy stock owners who sold stocks around Christmas or on New Year\’s Eve 2012 would be making their tax payments by the April 15 tax deadline.

House Republican leader Larry Cafero of Norwalk said in an interview that the latest numbers do not bode well for the upcoming budget negotiations in the next five weeks as the legislature rushes to finish its business before the scheduled adjournment on June 5.

\”What is frightening to me is the projections for revenue for the biennium are half a billion dollars shy of what both the governor and the Democrats’ budgets were based upon,\’\’ said Cafero, who says he is \”seriously considering\’\’ running for governor in 2014. “That means it’s back to the drawing board for both the Democrats and the governor with regard to this two-year budget. They’re either going to have to borrow more, tax more, or cut more.’’

Cafero is particularly concerned about weakness in the collection of the sales and corporate profits taxes.

“The sales and use tax is indicative of our economy – who is buying and selling,\’\’ Cafero said. \”Business is doing very, very poorly in Connecticut. It will turn around when we get our fiscal act together, when we stop with the borrowing. When you have to borrow under the guise of reducing the GAAP deficit to put it in the cash pool, this is just terrible.’’

Cafero added, “Other states are growing jobs. … It’s our fault. It is the governor’s fault and the Democratic legislature’s fault. It will end when we stop doing what we’ve been doing.’’

When told of Cafero\’s remarks about the next two years, Barnes said, \”It clearly creates some new concerns for us. It certainly puts some pressure on the legislature and the governor to find ways to control spending a little more.\’\’

But Barnes cautioned that the state, for example, would not need to make $500 million in cuts to cover a shortfall. If the state made $250 million in cuts the first year, such as in not filling positions, those cuts would remain into the second year and would cover the shortfall in that year, too, Barnes said.

\”The Republican caucus has a way of adding two years together, and it creates misleading information,\’\’ Barnes said.

But Barnes said that he is confident that Malloy and the legislature can finish the budget by the June 5 adjournment.

\”Yes, absolutely,\’\’ Barnes said Tuesday night. \”There is nothing to prevent us from doing that.\’\’

Part of the surplus in the current fiscal year also comes from the largest tax increase in state history that was passed by the legislature and signed by Malloy in 2011. The total includes a projected $8.6 billion from the state income tax and $3.85 billion from the state sales tax, which are by far the two highest sources of tax revenue that the state receives. Taxes on corporate profits are projected at $716 million for the current fiscal year.

State officials, though, are seeing weakness in collecting the state sales tax because of the still-sluggish economy. The projection for the sales tax is down by $30 million from estimates made in January.

\”This is due to nearly stagnant growth in cumulative collections over the prior year,\’\’ the fiscal office said.

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9 thoughts on “State Budget Statistics: Good In Short-Term, Tougher for Next Two Years On Taxes

  1. pat

    no one has the money to shop so how can they pay sales tax. the unemployed sure aren’t shopping and now some of the thrift shops, like the Helping Hands in Norwich, are having to close so where are they going to shop.

  2. Truth Teller

    What is frightening to us taxpayers is the way the Democrats wasted months on the asinine gun control bill only to now turn to a budget that is out of control and unsustainable.

    Take a bow Democrats. This is what we get with one party rule. What a ship of fools.

    1. America is Dying

      You said you would leave CT, Kim. Leave. Try applying to a nursing home in Florida. They would love to have you.

  3. Numbers

    The Laffer Curve lives:

    “These increases are one-time in nature, based on individuals taking capital gains and dividend income, or transferring assets, in advance of tax law changes that took effect on January 1,” said a statement from Gov. Dannel P. Malloy’s budget office. “The projections for [the next two fiscal years] reflect the consensus view that these revenues will not recur and that some of the revenue this year will in fact reduce revenue in the coming year.”

  4. The Great Pazuzu

    The Great Pazuzu will now speak.

    A good way to at least start realizing savings: Lay off managers.

    Managers are not covered under the SEBAC agreement of 2011 and there are way too many of them, especially at an agency like DCF.

    Like an endless cavalcade of clowns exiting a Volkswagen in a circus, everywhere one looks, there’s a manager twinkling their thumbs, doing nothing but making money hand over fist.

    Some collect upwards of $133,000 annually and they don’t even have caseloads. Their contributions to child welfare, on a good day, are questionable at best.

    I call upon the legislature to review management positions at DCF and other agencies. Review the bloated carcass called the agency’s organizational chart and see the waste of taxpayer dollars not hard at work.

    Review these fluff positions with an eye toward how non-essential these jobs are and cut, cut, cut.

    Like bleating, flatulent sheep on the way to be fleeced, the bureaucrats will protest, saying how important their function is in state government.

    Don’t buy into it. It’s past time to cut the fat and the waste and still have zero impact on service delivery. Just review those organizational charts.

    The Great Pazuzu thanks you all.

    1. bill

      If you had anything substantial to say, fine. But you only bladdered on without with accusations but without facts and suggestions. So it made you feel a little empowered this morning.

      Ah…the blessings of retirement, ah?

  5. Concerned Taxpayer

    The Great Pazuzu is absolutely right. Two years ago the Courant wrote a headline story on how CT has 1 Supervisor/Manager for every six employees while the rest of the country has a ratio of 12 to 1. We are at double the supervision of most other states. The Governor stated then, that he would reduce the number of managerial positions as time went on, but never did. Its time !

  6. Jeb

    Where is Brian? Isn’t this where you present a meaningless punchline rather than substantive comment

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