State Comptroller Kevin Lembo said Monday morning that the state is now in danger of running a shortfall of $415 million for this year, up $50 million from a month ago – and it could grow worse.
That forecast, contained in Lembo’s monthly letter to Gov. Dannel P. Malloy, emerged after Malloy last week had already ordered $170 million in budget cuts intended to reduce the deficit by $123 million; the other $47 million would come from reductions that already had been planned but not yet enacted.
Those cuts were ordered in response to last month’s estimate of $365 million by the governor’s budget office, the Office of Policy and Management. But with Monday’s new projection of $415 million by the comptroller’s office, “that leaves a projected remaining deficit balance of $242 million to be addressed through additional mitigation initiatives,” Lembo said.
Lembo attributed the $50-million difference between his estimate and the governor’s to spending by state agencies above their budgeted levels, particularly with regard to Medicaid health care costs for low income persons. “Statewide agency appropriations projected to year end are running above their appropriated levels even after consideration of OPM’s estimated deficiency appropriations,” Lembo said. “Medicaid – the largest single gross appropriation line-item in the budget – is significantly above the budget target.”
Roy Occhiogrosso, a senior advisor to the governor, said Malloy disagrees with Lembo’s calculations.
“However, the Governor, Comptroller, and it seems legislators all agree there is a current year shortfall that needs to be addressed before the end of the calendar year,” Occhiogrosso said. “The deficit mitigation plan the Governor will propose within the next couple of weeks will, based on the best available data at the time, bring the current year budget into balance.”
“Medicaid experienced double-digit increases last year and many of those trends are continuing this fiscal year, according to data from the Department of Social Services,” Lembo said. The current fiscal year’s budget “relied on over $100 million from Medicaid program savings initiatives, many of which have not been implemented to date, while caseload growth continues in the low-income adult program area with the addition of more than 4,000 clients since the start of the fiscal year.”
Lembo said he’ll be on the lookout for signs that the deficit will climb even higher – noting additional “budget risk factors” including unreimbursed costs from Hurricane Sandy and possible reductions in federal funding. “I am also concerned that other national and international economic factors could further erode the consensus revenue forecast,” Lembo said. “I will be closely monitoring any changes in these areas.
“Projected state spending above budgeted levels, and the slow pace of national economic recovery are impeding the state’s ability to bring the budget into balance. Economic indicators are below the levels normally observed at this stage of a recovery,” he said.
State legislators are expected to address the deficit when they return to the Capitol in Hartford for a pre-Christmas special session.