LEMBO All Eyes are On April
by Christine Stuart
/ Apr 2, 2012 2:01pm / CTNewsJunkie.com
http://www.ctnewsjunkie.com/ctnj.php/archives/entry/lembo_all_eyes_on_april/
Despite a drop in the state’s unemployment rate and the largest tax
increase in the state’s history, state Comptroller
Kevin Lembo is predicting that it will end the
year with a $120.8 million deficit.
The
projections Lembo shared Monday with Gov. Dannel P. Malloy’s administration are about $52.8 million
higher than the $62.6 million deficit the administration
estimated on March 20.
Lembo’s deficit projections are higher than the
Malloy administration’s because he doesn’t believe they will achieve $36.2
million in state agency lapses. Lembo concluded that
based on a four year average general fund spending through February represented
about 65 percent of the year’s total spending, so if this trend holds it’s
unlikely the additional lapses will be realized.
But Malloy
has been adamant about having a balanced budget with enough of a surplus to
transition to Generally Accepted Accounting Principles—one of his campaign
promises codified by his first executive order.
Last week at a meeting with state agency heads, Malloy
asked them to hold the line on spending. The message came just one day after the
legislature’s Office of Fiscal Analysis pegged the deficit at $124.4 million.
“No one’s
hair is on fire, the world’s not coming to an end, but to the extent that you
all can be helpful in giving us that insurance, I would appreciate it,” Malloy
told his commissioners March 27. That insurance includes eliminating or
delaying expenditures that aren’t “absolutely critical in nature.”
However, Lembo’s larger deficit number isn’t only based on spending.
Lembo expects the state to hand out nearly $22
million more in tax refunds than the $107.5 million the administration is
projecting. The increase in tax refunds this year is due mostly to the creation
of an Earned Income Tax Credit.
The deficit Lembo certified Monday is still below one percent of the
total fund appropriation which would force the governor to submit a deficit
mitigation plan to the General Assembly.
Like Malloy,
Lembo noted that the deficit could easily be erased
if April tax collections exceed expectations.
“All eyes
are on April,” Lembo said in a press release. “The
complex 2011 income tax withholding changes may have distorted the trend
analysis used for projections. As a result, final and estimated income tax
payments received in April could differ significantly from those projections.”
The income
tax hike was instituted retroactively and caused great confusion amongst
employers, including the state which had to refund payments to thousands of
employees who saw their paychecks shrink this past winter.
It’s unclear
what the retroactive income tax hike means for April collections.
What Lembo does know is general fund revenue is falling $118.2
million short of original budget projections and net state spending is $49.7
million below the original budget plan. Lembo said his spending projection reflects caution with
respect to the lapse due to the large increase in spending posted in January.
********************