Connecticut's Budget Deficit Up Another $50 Million

Officials for Gov. Dannel P. Malloy disagree with the state comptroller's deficit figures, but acknowledge they must now file a deficit mitigation plan with the legislature.

State Comptroller Kevin P. Lembo says the state's mushrooming budget deficit has jumped by another $50 million, bringing the official deficit figure today to $415 million.

However, because of a technical accounting glitch, Lembo's office has not factored in to that figure Gov. Dannel P. Malloy's recently ordered budget cuts, the Connecticut Mirror reports.

When those cuts are calculated, the website reports, it brings the actual deficit closer to $290 million.

Malloy's office, meanwhile, is questioning Lembo's deficit figures. Malloy officials say they don't believe the deficit is as high as Lembo is estimating, but offered no reason for why they don't agree with the comptrollers calculations, the Mirror reports.

Lembo said the state's budget woes are, in part, the result of higher than expected spending on Medicaid. Malloy has said he will file a deficit mitigation plan with the legislature before year's end. He has blamed the state's fiscal problems on the enduring and lingering impacts in Connecticut of the nation's economic downturn.

Bart Shuldman December 05, 2012 at 10:47 PM
If you have not heard, the State of CT needs to borrow money to pay every day bills. Things are getting really bad. It was just announced the state of Connecticut is so low on cash, state Treasurer Denise Nappier is seeking Gov. Dannel P. Malloy’s approval to seek up to $550 million in credit. Connecticut has depleted all but $103 million of the $1.4 billion budget reserve as the state’s cash position has steadily fallen. The treasurer had to transfer $366 million from bond fund investment accounts. The common cash pool has a negative balance. The treasurer has requested, and Governor Malloy has approved, the need to borrow funds externally in order to fund cash flow requirements for current operations. This is really bad, as Governor Malloy instituted the largest tax increase in the state’s history and we are now running a huge deficit. In addition, Governor Malloy granted the state employees a no-layoff agreement for the next 4 years. Our unemployment just passed 9%. Just thought you might want to know how bad things are getting in Connecticut.
Ken December 09, 2012 at 02:21 PM
Bart - Thanks for your informative post. I had also heard about Denise Nappier's request for a $550 million Line of Credit. I'm not a Financial Expert, so here's my question: Won't a Line of Credit continue to hurt Connecticut's credit rating (if actually used to pay our bills)? I mean, it may not be as bad as paying the bills with Bonding money, but I think it would still be a mark on our Credit worthiness, wouldn't it? Of course, a lowered Credit Rating would mean higher interest rates for the money we do borrow, which adds to the Budget expense, which increases the Budget deficit. It's a never ending downward spiral...
Bart Shuldman December 09, 2012 at 02:45 PM
Ken. What will hurt our credit rating will be the need to borrow money. Yes. But what is going to hurt the credit rating more is our unfounded pension liability that is now $60 Billion if they use a realistic 4.5% discount rate. In addition, the Governor will begin to cut back payments he makes to towns for things like myriads and education. That means your town will either need to raise property taxes to make up the loss or borrow more. Your towns cost of borrowing could go up depending on how healthy your towns finances are. We are about to enter a very difficult time in CT. Governor Malloy promised no layoffs for 4 years so we cannot reduce government head count. He also promises 11 more years for government workers to use overtime to calculate their pensions. We all know that game and it will d rive up liabilities more. So we have. Rising costs, lower revenue, even after a massive tax increase. How does he balance the budget with a projected $366 Million deficit. Where will it come from? No layoffs. Pensions going up. How will your town make up the lost money from the state? What happens to education in your town? Roads?
Ken December 09, 2012 at 04:21 PM
Bart - Thanks again for your reply. It's as I suspected…bad and getting worse... The good news (if there is any) is that I live in a town that receives very little aid from the State and our town finances are pretty healthy. That's not to say we won't feel the affect of cuts in aid, it just means we won't be decimated when Malloy cuts us off entirely. What frustrates me (at least ONE of the things) is this "no layoffs for 4 years" deal that Malloy gave the State Employees. In addition, I'd heard the other day that the "give backs" that came with that deal never materialized. What happened to "shared sacrifice"? It looks like the only people that are going to sacrifice are the taxpayers... One correction: You said “what is going to hurt the credit rating more is our unfounded pension liability”. I believe you meant to say, “unfunded”. On the other hand, perhaps you meant “unfounded”. :-) My wife and I are beyond the tipping point. While we’ll hate leaving loved ones behind, we've decided to leave Connecticut. After analyzing November’s election results in CT, I don’t see it getting any better anytime soon and perhaps within our lifetime. In my opinion, it’s a lost state. And the only recourse is to leave.
Bart Shuldman December 09, 2012 at 05:40 PM
Ken. My typing is bad. Yes I meant to say unfunded. Your decision is what will eventually drive CT further into trouble. Those that can be mobile and get out will leave. They tend to be the higher income people. Then the burden will be on the others but the revenue will not be there. It will all spiral down. The huge pension liability is not going away. CALPERS announced they earned 1% this year. How much did our pension plans earn? We are using a high discount rate in calculating how much we owe. If we use a realistic 4.5%, then CT owes $60 BILLION. we are basically broke. And why Malloy let the unions still use the unfair use of overtime is criminal. In one year Malloy helped to bring CT down. He even gave away $150 million in tax help to Bridgewater, a firm in Westport, so they could to his home town Stamford. Disgusting.


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