Governor Rell: Deficit Estimate Climbs to $356 Million

‘This Is a Time for Leadership,’ Governor Declares

            Governor M. Jodi Rell today said her budget office now estimates the current state budget deficit at slightly more than $356 million, due in large part to sharp declines in sales taxes and revenue from the oil companies tax.

            “The situation is serious and, as both state and federal economists have warned, it is going to get worse before it gets better,” Governor Rell said. “It is vital that the Legislature use the special session on Monday to act on the plan I have submitted to reduce state spending, and that legislative leaders continue working with me to identify additional areas to save. This is a time for leadership – no program, no constituency and no project can be held sacred.

            “Like Connecticut families, state government must face the bare fact: There is not enough money to do everything,” the Governor said. “We are going to have to defer some of our desires until the economy picks up again – as we know it will. I am ready to work with anyone who has the best interests of Connecticut’s taxpayers at heart – and ready to drag the rest along, kicking and screaming if need be, until we get the job done.”

            The current estimate of $356.3 million compares with last month’s estimate of $107.9 million. The increased deficit reflects a projected decrease in sales tax revenue of $115.6 million, due to slowing consumer activity, and a decrease in oil companies tax revenue of $100 million, due primarily to sharply lower energy prices.

            Other changes include a projected increase in income tax refunds of $25 million and a projected decrease in investment income of $20 million. Income from the state’s two tribal casinos is also expected to drop by $16.4 million.

            The Governor’s plan to mitigate the current-year shortfall, up for consideration by the Legislature on Monday, relies on a combination of spending cuts, new revenue owed Connecticut by the federal government, a tax amnesty program, the cancellation of the start of new state programs and additional efficiencies in state government. The plan requires no new taxes, no employee layoffs and it leaves the state’s $1.4 billion budget reserve fund – also known as the Rainy Day Fund – alone.

            Since the spring, Governor Rell has taken a number of critical steps to reduce state spending. She instructed commissioners and other agency chiefs to review their expenditures and stop all non-essential spending, and directed them to begin a ban on out-of-state travel by all personnel unless the trip is paid for out of non-state funds.

            The Governor also ordered two rounds of budget rescissions at many state agencies. The rescissions will reduce General Fund expenditures by a net total of about $180 million.