Cafero, McKinney Clash With Malloy Over State Tax Revenues As Economy Remains Sluggish

With the Connecticut economy still growing slower than hoped, state tax revenues are coming in slower than expected under the state budget – leading to a deficit in tough fiscal times.

The legislature’s nonpartisan fiscal office and the governor’s budget office issued estimates Friday on more than 20 major categories of revenue under a relatively new state law that requires them to analyze the numbers by November 10 every year.

Gov. Dannel Malloy’s budget director, Ben Barnes, says the numbers are “not surprising given the continued sluggishness of the national economic recovery.”

But Republicans immediately raised questions about the estimates and called for a special session under state law to focus on solving the state’s fiscal problems with a deficit-mitigation plan. They charged that bad news had been hidden until after the election and that it was released on a Friday afternoon so that few people would notice.

The state is expected to collect a record-breaking $8.5 billion from the state income tax during the current fiscal year that ends in July, partly from tax hikes pushed by Malloy and the legislature. The sales tax, which was also increased by Malloy and the legislature, is expected to generate $4 billion this year.

“Another update is due in January that will underpin the two-year budget that the governor will offer in February,” Barnes said in a statement. “It is far too early to know what revenues will look like as we get closer to the fiscal year that starts next July, but Connecticut residents and businesses should know that the governor intends to do whatever is necessary –including potentially painful cuts in state spending — to ensure that the budget is balanced and that we are living within our means. We will continue our progress in making government run more efficiently.  One thing the governor has been clear about:  he does not intend to raise taxes to cover a fiscal shortfall.”

“This is the fourth consecutive time revenue projections have been downgraded since the Malloy budget was adopted,” Senate GOP leader John McKinney said in a statement. “This administration needs to recognize this trend and begin preparing for the worst. Their budget is broken, and Connecticut has another fiscal crisis on its horizon.”

McKinney continued, “By law, the governor will be required to submit a deficit mitigation plan to the legislature if the Comptroller certifies this deficit on December 1st. But the governor shouldn’t wait until then to get started. We have a $205 million deficit in the current fiscal year, and we face a structural deficit of hundreds-of-millions of dollars in 2014. Governor Malloy has a fiduciary responsibility to immediately and publicly explain how he intends to deal with this crisis.

“He says he has no intention of raising taxes and – given that he just imposed the largest tax increase in state history – I hope he will keep that commitment. But, I am skeptical. And I am concerned about his track record in dealing with past deficits – raiding the special transportation fund, breaking his GAAP promise, and borrowing to pay for operating expenses. And, don’t forget, he can’t get anything more out of state employee unions because he has signed a five-year, no-layoff guarantee.

“The foundation of the Malloy budget has always been weak, and the governor has exhausted every easy option and one-time gimmick he could think of to keep it afloat. Now we’ve got a real problem. And Governor Malloy needs to provide some real solutions for dealing with it.

“Finally, let’s not lose sight of the fact that under previous law, we would have had this information on October 15th – three weeks before the election. On the final day of the legislative session, the Democrats moved the date of this report in order to hide this bad news until after the election.”

In an interview, House Republican leader Larry Cafero said, “These consensus revenue figures show we are at least $128 million in revenue less than what we had budgeted for. The governor then issues a press release indicating that it’s $52 million less. What he means is less than the April consensus revenue figures. Well, the April revenue consensus figures are irrelevant. To say we’re $52 million less than April is very misleading and disingenuous. We are at least $128 million less than what we as a legislature had budgeted for and what we as a state are running on.’’

“The revenue side shows that every single revenue category is down, but for one – the federal revenue category’’ for reimbursements, including Medicaid, he said.

“We have a budget deficit, four months into the fiscal year, that requires a deficit mitigation plan,” Cafero said. “For the governor to come out with a press release using the figure $52 million is wrong. At worst, it’s deceiving and deceitful. Where does he get $52 million when the report itself says $128 million?’’

“For the governor to put out a press release on $52 million is the least transparent, most deceitful thing I’ve seen,” Cafero said. “It’s wrong. It is very wrong, and that is unconscionable.’’

The financial details are available at http://www.ct.gov/opm/cwp/view.asp?a=2965&q=459726 .