The state’s multi-million dollar budget deficit could end up being larger than originally reported.
Comptroller Keven Lembo said that after accounting for about $102.8 million in rescissions announced in September and an updated consensus revenue forecast from last month, the state is on track to end the current fiscal year with a $122.4 million deficit.
The projection by the Office of Policy and Management is $4 million more than last month’s, according to Lembo.
Lembo said the projection is feasible; however, ongoing mitigation talks between Gov. Dannel Malloy’s administration and lawmakers are correct in targeting between $350 million and $370 million.
“I am very concerned about more recent disruptions to the state’s positive economic trends,” Lembo said. “Of greatest concern are the last two consecutive months of state job losses and the related negative impact on the withholding portion of the income tax.”
The OPM estimated achieving $303.4 million in savings this fiscal year.
“An increase in interest rates will limit the state’s ability to realize future savings in debt service,” Lembo said. “I am hopeful that the ongoing budget negotiations will produce the policy revisions necessary for OPM to attain the lapse target included in the current projections.”
Lembo said there are several areas of the budget to watch.
“Part of the state’s slow withholding growth can be attributed to the distribution of job gains by employment sector during this recovery,” Lembo said. “The financial services sector pays wages that are more than 50 percent above the statewide average for all sectors; however, the financial services sector remains 14,700 jobs (10 percent) below its pre-recession level.”
At the same time, the leisure and hospitality sector that pays wages 46 percent below the statewide average for all sectors has added 19,200 jobs, or about 14 percent, according to Lembo.
“There are additional budgetary risk factors that bear watching,” he added. “Our state economy is linked to the national economy which, in turn, is dependent on the global economy. Global economic events have generally constrained domestic growth.”
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