Connecticut Gov. Dannel Malloy on Monday acknowledged an estimated $121 million budget shortfall and called for bipartisan meetings.
The gap amounts to about half of 1% of the overall budget.
Malloy, at a news conference at the state capitol in Hartford, said the Office of Policy and Management notified state Comptroller Kevin Lembo about new projections, even after the governor made $103 million worth of cuts in mid-September. Those cuts mostly affected hospitals and human-services programs.
Malloy said he would provide more specifics next week on short- and long-term budget strategy,
State budget director Benjamin Barnes cited “the impact of stock-market volatility”
“With Wall Street on a significant, unpredicted downturn, further tough decisions need to be made,” said Malloy.
The talks could lead to a special session by year’s end to reconsider the $40 billion spending plan lawmakers had approved in the wee hours of June 30.
Republicans have called for such a session, though Democrats hold an advantage in both chambers, 20-16 in the Senate and 87-64 in the House.
The June budget crisis prompted suggestions by corporate behemoths General Electric Co., Aetna Inc., Travelers Cos. and Boehringer Ingelheim Pharmaceuticals Inc. that they would consider moving out of state.
“Certainly I think it’s a good idea to get everybody talking, though that still might not get the desired result,” said Alan Schankel, a managing director at Janney Capital Markets.
Connecticut has operated under rating agency glare, given its budget shortfall, high debt level and unfunded pension liabilities. The state is just $63 million shy of Malloy’s $2.5 billion
Bond ratings have triggered partisan bickering in the past, notably in early 2012 when Moody’s Investors Service lowered Connecticut’s general obligation bonds to its current Aa3 rating from Aa2. Fitch Ratings, Standard & Poor’s and Kroll Bond Rating Agency all assign AA ratings.
Fitch in July removed its negative outlook and restored it to stable. Moody’s and Kroll also assign stable outlooks while S&P assigned a negative outlook in March.
“Poorly funded pensions are pressuring budgets in New Jersey, Pennsylvania and Illinois, Connecticut, Kansas [and] Kentucky,” Wells Fargo Securities LLC said in a report. “Rating agencies and markets are reacting.”
Citing data from the Center for Retirement Research at Boston College, Wells Fargo listed the Connecticut State Employees Retirement System’s funding level at only 41.5% in 2014, although the state paid 99.7% of its actuarially required contribution a year earlier.
“I’ve been a little critical of Connecticut because they’ve come in a little low on pension funding, but they did get rid of a lot of one-shot budget items,” said Janney’s Schankel. “They’ve been willing to raise taxes and have taken steps to address the transportation infrastructure problem and try to improve it.”
One option on the table is for Malloy to scale back his 20-year, $100 billion transportation improvement plan that Republicans have criticized as unaffordable.
