State Shortfall For 2011-12: $143 Million, Not As Bad As Feared

The state’s budget shortfall was not, in the end, as bad as it looked like it would be: A total of $143.6 million of red ink, according to a report today from Comptroller Kevin Lembo.

“The deficit amounts to less than 1 percent of general fund spending,” Lembo told Gov. Dannel P. Malloy, in a letter.

The reasons: A huge jump in Medicaid costs and income tax collections that fell short because of capital gains and bonuses.

Since the state can’t carry a deficit from year to year, the money will be made up with a transfer from an account set aside to cover payments for the nearly $1 billion the state borrowed in 2009.

We are thankful for low interest rates, which make all this borrowing and postponing possible.

The shortfall includes tax collection that ended up $227 million under budget, even after Malloy and lawmakers raised taxes by $1.5 billion.

The main problem: The income tax came in well below estimates. Typical workers did about as well as expected, but capital gains and bonuses didn’t make the grade — so blame Connecticut’s latest fiscal woes on Wall Street, and feel sorry for some of the shortchanged investment bankers, but not others.

We did our part at the cash register, as state sales tax revenues came in $41 million above estimates, at $3.8 billion. And the gift and estate tax came in ahead of schedule by $33 million, even though it was well down from fiscal 2011, when the value of multi-millionaires dying here was far greater.

On the spending side, Lembo reports, general fund spending was up by $937 million, or 5.2 percent.  Some of this is good news: We got back on track in paying the teachers’ and state retirees’ pension funds, adding $300 million in those accounts over the fiscal 2011 amounts.

But because of a spike in Medicaid cases, the Department of Social Services outlay was bigger than the prior year to the tune of $409 million.

Today’s report follows a report Friday from the state Department of Revenue Services, showing tax collection was up by $1.9 billion, but still short of the goal.

Final CT Tax Collections 2012

About $400 million of that was not a real increase, but rather payments from hospitals and nursing homes, which was returned to them — a game designed to get more federal aid.

Earlier in the spring it looked like revenues were coming in even lower, as refunds were coming in higher than expected. But, said tax commissioner Kevin B. Sullivan, “It looks like we made up some ground in the last month.”