Budget documents: Connecticut's surplus collapsing
HARTFORD, Conn. (AP) — The projected surplus for Connecticut's budget has plunged, new figures show, prompting Republican lawmakers to accuse the Democratic governor of misjudging how much revenue Connecticut could have realistically expected to collect from investment income.
Gov. Dannel P. Malloy's budget office and the General Assembly's nonpartisan Office of Fiscal Analysis now agree the state's major spending account will end the fiscal year June 30 with a $43.4 million surplus. That's a drop of $461.5 million from January estimates, according to budget documents released Wednesday. The decline has prompted Malloy to scrap some of his plans for the surplus money, including a $55-per-person tax refund and an additional $100 million state pension payment.
"They either weren't asking the right people the right questions or they just didn't want to," Senate Minority Leader John McKinney, a Fairfield Republican, said of the personal income tax collections, which represent $389.1 million of the $461.5 million drop. McKinney is one of six Republican candidates for governor who hopes to challenge Gov. Dannel P. Malloy in November.
But Malloy's budget director, Benjamin Barnes, contends that other states with high net worth residents, including New Jersey, experienced similar revenue drops in their April capital gains tax collections because a greater than expected number of wealthy taxpayers claimed investment income in 2012, ahead of the Jan. 1, 2013, expiration of former President George W. Bush's tax cuts.
"This is a national phenomenon that we believe is especially acute in Connecticut because of the prosperity of some of our residents and their net worth," Barnes said. "But we don't believe that we are by any means alone."
Connecticut's latest revenue estimates come a week before this year's General Assembly session adjourns. Malloy's budget staff is meeting privately with majority Democratic legislators to craft a revised budget for the new fiscal year, beginning July 1, that rank-and-file lawmakers will vote on. Because these new revenue figures have a domino effect on future budget years, meaning there's now less money to spend, next fiscal year could now be nearly $300 million in deficit unless action is taken.
Deficits of more than $1 billion are projected in future budget years.
Mark Ojakian, Malloy's chief of staff, said "everything is on the table right now" when it comes to balancing the budget. That could mean the desire of legislative leaders to scrap plans for the new gambling game Keno could be scuttled because the game's projected revenue is needed.
"At the end of the day, we will have a balanced budget and it will maintain our priorities," said Ojakian, adding how indicators show Connecticut's economy is moving in the right direction, including growth in other state taxes.
The Democratic governor's handling of the budget and economy is expected to be a key issue in this year's gubernatorial race. Malloy is seeking a second term.
McKinney said he believes these latest revenue figures are a political liability for Malloy, who contends he's made progress over the past three-and-a-half years toward improving the state's budget picture and leading the state out of the recession.
"This just now really eliminates any ability for the governor to go out and beat his chest about budget surpluses, solving the problems and the like," McKinney said. "Because he hasn't solved the problems."