Connecticut’s Office of Policy and Management has announced $170 million in spending cuts to meet half of its estimated budget shortfall for the current fiscal year.
Wednesday’s announcement came two weeks after OPM Secretary Benjamin Barnes told the state legislature’s appropriations committee that Connecticut was facing a $365 million deficit — almost twice as large as the $205 million estimate and nearly double the level necessary for Gov. Dannel Malloy to prepare a deficit-reduction plan.
Barnes said state officials would produce a legislative proposal for deficit mitigation in December.
“There is no one reason for the projected shortfall,” Barnes said Wednesday. “The sluggish national economy is part of the equation. Revenue hasn’t recovered as it has in the past when Connecticut was working to climb out of the recession. The demand for services, particularly Medicaid, remains higher than expected. But we have faced larger challenges than this, and done so responsibly. Nothing on that front has changed.”
Wednesday’s recissions for the executive branch agencies, which are made by the governor, total $162 million. Legislative leaders have agreed to $3 million and the judicial branch $5 million, according to Barnes.
Connecticut’s budget problems have been under rating agency glare all year. Moody’s Investors Service in January lowered the state’s general obligation bond rating to Aa3 from Aa2, citing debt and pension costs.
Fitch Ratings, Standard & Poor’s and Kroll Bond Rating Agency all assign AA ratings.
“The increase in projected operating-deficit levels is due to a downward revision of revenue forecasts, based on weakness in collections of certain revenues, including Indian gaming revenues (casino-related revenues), corporate taxes and sale taxes,” Kroll said in a report that preceded Connecticut’s Nov. 2 $400 million sale of GO bonds. After the bond offering, the state’s outstanding GO debt totaled roughly $15 billion.
The Pew Center on the States, a Washington think tank, listed Connecticut’s pension funding level at 53%. Pew considers 80% an acceptable threshold.
In recent years, the state’s annual share of gambling revenues has fallen by more than $100 million because of the struggles of Foxwoods Resort Casino and Mohegan Sun. Under agreements with the respective operating tribes, the Mashantucket Pequot Tribal Nation and Mohegan Tribe, the state receives a 25% share of slot-machine revenue.
Earlier this month, Hartford, Conn.-based asset manager Conning rated Connecticut last in its credit-quality analysis of the states, citing a high debt and expenditure burden, weak employment growth and declining home values.
State Treasurer Denise Nappier accused Conning of “simplistic methodology.”