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October 16, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

Legislative leaders, Malloy to discuss projected $207.8 million budget deficit

Legislative leaders and Gov. Dannel Malloy are scheduled to meet on Dec. 6 to discuss the state’s estimated $207.8 million deficit – talks that could grow heated, if recent comments on both sides are any indication.

The $207.8 million estimate by State Comptroller Kevin Lembo represents more than 1 percent of the general fund, which requires the governor to draft a deficit mitigation plan for the General Assembly to adopt.

In a letter to Malloy, Lembo said he expects a $20 million deficiency in the state’s adjudicated claims account that is used to pay claims and attorney fees in the SEBAC (State Employees Bargaining Agent Coalition) vs. Rowland settlement, and noted the “great uncertainty” surrounding the proposed federal tax reform. The class action lawsuit was brought by state workers who were laid off or demoted under the Gov. John Rowland administration who sought economic damages as a result of the job losses.

“Congress is considering significant modifications to federal tax law that could have profound implications for Connecticut, depending on what specific provisions, if any, are enacted,” Lembo said. “Future revenue forecasts will need to evaluate the consequences of any tax changes on the federal level.”

On the spending side, Lembo said, with seven months still to go in the fiscal year, there have already been $12.5 million spent from the adjudicated claims account in the SEBAC vs. Rowland settlement and other issues, and the account has averaged $2.5 million per month in costs. In light of this, Lembo said he is projecting a $20 million deficiency in adjudicated claims that could go higher due to the unpredictable nature of the settlements involved.

“Another area of concern that will require close scrutiny is the aggressive level of savings included in the adopted budget,” Lembo said. “Achieving these lapse – or savings – targets will be a significant budgetary challenge, especially in light of the high levels of fixed costs for FY 2018, such as debt service payments, pension contributions and other costs.”

Lembo said Connecticut must also catch up to the national economy in economic growth.

“In recent years, Connecticut has not fully participated in the nation’s economic recovery,” Lembo said. “The national economy continues to exhibit growing signs of strength and resilience. However, Connecticut’s economy has experienced much more mixed results across a variety of key economic indicators.”

Senate Republican President Pro Tempore Len Fasano (R-North Haven), who frequently butted heads with Malloy during the budget negotiations, released a statement saying that, “While we may disagree about the size of the shortfall, it’s clear that any budget, including the one Gov. Malloy negotiated, would be in deficit today. Since Gov. Malloy’s budget also did not include adjudicated claims, his plans would also be facing the same issues he is saying impact the legislature’s budget.

“For years we have seen damaging financial policies destroy our state’s economy,” Fasano continued. “As we expected, even the passage of a historic bipartisan budget with significant structural changes is not yet enough to immediately right the ship. As Gov. Malloy now begins to build his own deficit mitigation plan, I caution him to remember how his past policies have failed our state …. While our bipartisan budget remains an important first step to change the direction of our state, it is sad that the policies of the last seven years continue to pull our state down.”

Malloy’s Director of Communications Kelly Donnelly released a terse statement of her own in response.

“Senator Fasano’s statement about the Comptroller’s projected deficit in the bipartisan budget mentions the governor no less than three times,” she said. “So our question to the senator is simple: When are you going to take responsibility for your own actions and your own budget?”