Connecticut seeks disaster status as deficits, coronavirus deaths rise

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Connecticut Gov. Ned Lamont asked President Trump to declare his state a major disaster area amid a rising death count from the COVID-19 pandemic that is bringing mounting budget deficits.

Lamont on Thursday reported 21 deaths due to the coronavirus, with 125 people hospitalized and 1,012 confirmed cases. In his request to the Federal Emergency Management Agency, Lamont cited Connecticut's proximity to hot spot New York.

Connecticut Gov. Ned Lamont (left, in tie) has requested a federal disaster declaration because of the impacts of the coronavirus.

Thirteen of the reported 21 deaths are in Fairfield County, close to New York City, which has become the epicenter of COVID-19 in the United States.

In his letter to Trump and Federal Emergency Management Agency Regional Administrator Russ Webster, Lamont asked for direct federal assistance and four supplemental assistance programs to all eight counties.

The state stands to receive about $1 billion from the federal aid bill.

Connecticut's budget deficit for fiscal 2020, meanwhile, has nearly doubled from diminished revenues related to the COVID-19 pandemic, according to the General Assembly's nonpartisan Office of Fiscal Analysis.

More troubling for the state, though, is the inaccessibility of collection data for state consensus revenue projections due to the three-month delay in federal and state income-tax filings.

"Further significant revenue adjustments to FY20 revenue estimates are likely as more information becomes available," OFA said in an analysis it released Wednesday. "Moreover, we expect future estimates to include major downward revisions to state revenue projections for FY21 and beyond."

The state's general-fund deficit spiked by $88.1 million, to $178.2 million, from its late-January estimate of $90.1 million and the Special Transportation Fund plummeted from a $5.1 million surplus to a $23.8 million gap.

According to OFA, the projected general fund deficit will reduce, to $139.5 million from $317.7 million, the projected FY2020 deposit into the budget reserve fund from the volatility adjustment transfer.

Connecticut, which operates on a biennial budget, has low ratings for a state government: A from S&P Global Ratings, AA-minus from Kroll Bond Rating Agency, A1 from Moody’s Investors Service and A-plus from Fitch Ratings.

Lower-rated states are at greater risk during a recession, rating analysts have said.

The transportation fund, backstopped by fuel taxes and various fees, pays for debt service on transportation bonding and the operating costs of the Department of Transportation and Department of Motor Vehicles. State budget Secretary Melissa McCaw said in late January the fund could run a deficit by 2025 without a dedicated funding source.

Variables include the state's rainy-day fund balance, projected for $2.645 billion at fiscal year-end. "We expect this projected balance to vary significantly as FY20 revenues are finalized in the following months," the report said.

OFA, in its November fiscal accountability report, estimated $3 billion would be necessary to cover lost revenue over two fiscal years in a typical recession. Additionally, it estimated that forgone revenue growth in a typical recession would be $1.5 billion.

This means that the general fund budget could face an additional structural deficit of $1.5 billion after a typical recession ends.

The state's budget struggles preceded any pandemic. Chronic deficits, steep legacy costs and a business erosion are all on the radar of bond rating agencies.

In the Special Transportation Fund, OFA revised the oil companies tax downward by $30 million, or about 9% of budget, to reflect a sharp downturn in oil prices.

"However, the FY 20 STF currently projected deficit seems likely to be mitigated by a reduction in debt service, once additional information regarding transportation bond issuance is available in April," its report said.

Earlier in the week, Lamont announced the launch of the $25 million Connecticut Recovery Bridge Loan Program to help small businesses and nonprofits affected by the pandemic.

The Department of Economic and Community Development will administer the program.

Also on Thursday, Lamont suspended the tax on single-use checkout bags.

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