Budget punt again

T he General Assembly’s primary responsibility during the legislative term that began five months ago was to close the existing budget gap and adjust the second year of the two-year budget to bring it into balance. According to Comptroller Kevin Lembo, it failed.

“Connecticut is on track to end the current fiscal year with a $721 million deficit that reflects the results of the recent bipartisan budget agreement,” read a statement released by Lembo’s office Friday.

The revision to the state budget signed by Gov. Dannel P. Malloy May 15 increased the deficit projection by $334.3 million for the fiscal year that ends June 30, according to Lembo, a Democrat.

The deficit grew, said Lembo, because the budget shifts certain funding from the current budget to the fiscal-year 2019 budget that begins July 1, covering up projected shortfalls. These include about $300 million in payments to hospitals, $21 million for Medicaid and $21.5 million for state retiree health insurance.

To make this possible, the General Assembly ignored the volatility cap law it had passed only a few months earlier, in October 2017. Approving the cap, the legislature had agreed to use any revenue windfalls to build up the state Budget Reserve Fund, commonly known as the rainy day fund. Yet confronted with a windfall in unexpectedly high income tax revenues, much of it associated with onetime tax manipulations tied to federal tax law changes, the General Assembly ignored the volatility law it had passed in bipartisan fashion.

Following the volatility law would have boosted the reserve fund to $1.3 billion, Lembo calculated. Instead, most of that windfall income will be diverted to close the deficit, leaving a $766 million reserve, 4 percent of the general fund. Lembo recommends 15 percent be kept in reserve to protect from future revenue downturns.

“While many important state and municipal programs were preserved,” writes Lembo, the legislature largely used “revenue that is onetime in nature.”

The bottom line is that the next governor and legislature elected in November will face a continuing state budget crisis and a toosmall rainy day fund. The Office of Fiscal Analysis estimates a $2 billion deficit in the 201920 fiscal year, rising to $2.6 billion in 2020-21.

Let’s hear candidates talk about that when seeking your votes.