Governor M. Jodi Rell today announced that her budget office now estimates the shortfall in the current year’s state budget at about $667 million, reflecting an infusion of more than $380 million in federal stimulus money but a continual, steady drop in tax collections.
“The recession continues to erode all our revenue streams. It is crucial, and has been for months now, that we urgently identify and act on spending cuts,” Governor Rell said.
The persistent gap comes even after the latest round of budget cuts by the Governor and General Assembly. Governor Rell has taken a number of cost-saving steps over the past several months, including four rounds of rescissions, a ban on out-of-state travel, a hiring freeze and she has presented three deficit mitigation plans to the Legislature.
“We are still chasing a moving target,” Governor Rell said. “There remains millions of dollars in potential savings left on the table from the last mitigation plan and it is more than past time – midway through the current budget year – that we tap into them. That is the essence of my fourth mitigation plan. The Legislature and I must work together to identify those savings on which we can agree. The taxpayers of Connecticut are counting on us to make a real difference this time.”
The estimate today from the Office of Policy and Management is the latest of several projections of the current budget year shortfall, which was $944 million last month. The monthly letter from OPM to the Comptroller includes a downward revision of revenues by $275.8 million.
OPM points to a drop in personal income tax of $60 million and a drop in sales tax revenue of $85 million. State tax refunds are also expected to be down by $120 million because they have significantly exceeded their target and because various business tax refunds – notably the Film Industry Tax Credit – have exceeded their target.
Additional cost-cutting and an increase in the amount of money agencies expect to have left over when this fiscal year ends on June 30 also helped offset the decline in tax collections. That resulted in increase in deficit of $107 million from February’s estimate. Also off-setting revenue losses for the month is the estimated $383.8 million the state is expected to receive from the enhanced Medicaid reimbursement in the federal American Recovery and Reinvestment Act of 2009.