Connecticut's now-projected $172.8 million general fund deficit for fiscal 2015 is close enough to the legal threshold for a mandatory mitigation plan that state officials should work on a solution immediately, according to state Comptroller Kevin Lembo.
"Because my current estimate is so close to the mitigation trigger and only three months remain in the fiscal year, I recommend that deficit reduction planning with the legislature should proceed without delay," Lembo said Wednesday in a letter to Gov. Dannel Malloy.
Lembo's projection falls just short of 1% of this year's general fund. Under state law, the governor must submit a mitigation plan within one month should the comptroller certify a shortfall exceeding the 1% threshold. That amount this year would be $176 million.
Connecticut's budget problems are under the glare of the bond rating agencies. Standard & Poor's early last month lowered its outlook on the state's general obligation bonds to negative from stable, citing the budgetary pressures of weak revenue growth.
S&P affirmed its AA rating on Connecticut's $16 billion parity GO debt outstanding. Fitch Ratings and Kroll Bond Ratings also assign AA ratings while Moody's Investors Service rates the bonds Aa3.
Earlier in the day, Malloy, a Democrat, announced $13.7 million worth of further rescissions, or cuts.
"The comptroller's estimates don't take into account the budget rescissions announced today, although we had informed him they were coming," Office of Policy and Management Secretary Benjamin Barnes said in a statement. "If it proves to be the case that we have to do deficit mitigation it will be part of the end-of-session budget negotiations."
Deficit projections have varied widely, from Barnes' $133 million estimate to $191 million from the General Assembly's Office of Fiscal Analysis - both estimates last month.
According to Lembo, the most significant revenue shortfalls are related to federal grants, the health provider tax and the income tax, while the sales tax and corporation tax recorded notable gains.
Lembo also noted a $14.3 million cash shortfall in the retiree health insurance fiduciary fund. The fund, while not technically attributable to the general fund, holds employer, employee and retiree health contributions and pays medical claims for eligible retirees.
The state's Republican leadership was highly critical. "We should have been addressing these deficit issues all along," said Sen. Rob Kane, R-Watertown, the ranking Republican senator on the Appropriations Committee.
