Fear And Loathing Up In Hartford Over Defecits

I can’t with any semblance of fiscal believability write anything more about the latest salvo from Rell over the projected state budget deficit. For one, I have long maintained that until Connecticut adopts GAAP, the numbers put forth by the Governor or the legislature are fictional. Both sides use the numbers to spin whatever they want week to week, while governmental bean counters struggle to present the actual picture to us mere mortals.

The Advocate reports:

The state’s financial picture worsened Monday with Gov. M. Jodi Rell’s announcement that a projected $145 million deficit has doubled to $300 million.

“We’re seeing weakness in most of our revenue streams, top to bottom,” said Rell’s budget director, Robert Genuario of Norwalk.

On the 20th of each month, Genuario’s office is required to submit a budget projection to the state comptroller.

In a statement released yesterday, Rell said, “Our state economy has been doing better than the national economy, but we are simply not immune to the effects of the national economic downturn. We are lowering estimates for personal income taxes, casino revenues and other taxes.”

The state Office of Policy and Management estimates a $75 million loss in personal income tax revenue, a $20 million drop in casino revenue, $10 million in losses in sales tax and insurance company taxes, and a $5 million decline in taxes on cigarette purchases.

Genuario will discuss the numbers Thursday in a budget hearing at the Capitol. It was too soon to provide data on what effects the Wall Street crisis will have on state revenue, he said Monday.

His office anticipates that layoffs of Wall Street employees will affect Fairfield County.

“Nothing I present on Thursday will be reflective of the Wall Street activity, except to acknowledge it . . . is unlikely to result in better projections,” Genuario said.

About 45 percent of the state’s personal income taxes are paid by Fairfield County residents.
Genuario said his office is working with Rell in proposing budget cuts on top of the $140 million she ordered over the summer. The governor has the authority to order 5 percent total agency cuts.

State Rep. Christopher Donovan, D-Meriden, said the $300 million deficit is “not great news” but should not cause panic. The state Office of Fiscal Analysis recently projected a much lower deficit, about $24 million, Donovan said, and Connecticut has a $1.4 billion contingency fund.

Unlike the Republican minority, Democrats have been content to wait until November to receive a full briefing from Genuario on the state’s fiscal picture. The annual presentation to the finance and appropriations committees is scheduled for Nov. 18.

“The numbers come in bits and pieces over the next month or so,” Donovan said.

He was concerned that Rell is “putting out a kind of fear message,” he said. “I think we’ve got to be careful about that.”

On Monday, the Connecticut Conference of Municipalities sent Rell a letter urging her not to touch state aid to cities and towns.

“Transferring the burden of a state deficit onto the backs of local governments and property taxpayers is a false economy,” conference leaders wrote, noting that Rell has said she will not support tax increases to address the deficit.

“As the discussion on budget cuts begins, let it be clear that reductions in state aid to municipalities would result in . . . local property tax increases,” the letter read. “Any proposals to chop municipal aid would be smoke and mirrors (and) simply shift the fiscal ramifications of the state’s deficit onto the front steps of town halls across Connecticut.”

Genuario said Rell’s power to rescind the state budget exempts aid to cities and towns.

Both Bridgeport and New Haven have announced cuts in city government staff numbering in the 30s.  Which kind of makes that state funding issue a bit more interesting.

source: Advocate, State deficit now $300M, By Brian Lockhart, September 23, 2008