The bad economic news is not ending.
The state's chief financial overseer, Comptroller Nancy Wyman, said Monday that the state deficit for the current fiscal year is now projected at $624 million - a total that is higher than originally estimated by other agencies.
The biggest impact from the numbers is that - if the trend continues at this rate - the scheduled sales tax reduction would not occur on January 1. Republican Gov. M. Jodi Rell and legislators had pushed for the cut to 5.5 percent, down from the current 6 percent sales tax. But if tax collections are off, the sales-tax cut will not occur. Many Republicans had predicted during the budget debates that the cut would never happen.
Overall, state tax collections are now off by $407.6 million.
Wyman's projection is $235 million than one made by the state Office of Policy and Management, which generates the numbers for the governor's office.
"Although I see a slight improvement in revenues occurring toward the end of the fiscal year,'' Wyman said, "my projection takes into account the accelerating job losses, high unemployment, and decline in personal income that Connecticut residents are seeing now and can expect to see in the near future.''
With higher-than-expected unemployment and a weaker-than-expected economy, many economists are skeptical that cash-strapped consumers could generate a brisk Christmas shopping season. With fewer sales for the next two months, the state would generate less sales tax - which is already down from the original projections.
Wyman reported that the all-important estimated quarterly payments of the state income tax were off in September by 29 percent. These are the payments made generally by the state's wealthiest residents, who rely disproportionately on capital gains and dividends from Wall Street for a large percentage of their income. This is also the state's most volatile revenue stream because it is dependent on the ups and downs of Wall Street.
Under Rell's most recent estimates, the sales-tax cut was still preserved - but just barely. But Wyman's official numbers will be the deciding factor.
"I wish I had better news about the revenues and the implications for a sales tax cut," Wyman said in a statement, "but my projection is based on actual tax collections and underlying economic trends that cannot be ignored."
At the same time that the revenues are down, state spending in some agencies is up - to the tune of $212 million.
"The legislature's budget contained numerous structural deficiencies that have begun revealing themselves in the analyses from both OPM and the Comptroller,'' Rell said. "It is significant and troubling to have such high deficit estimates so early in the fiscal year - which again points to the need for prompt action. While we may disagree on the specific estimates, we should all agree that we cannot wait for the regular legislative session to take remedial measures.''
Rell continued, "I have already conducted several meetings with the Office of Policy and Management over the last week and am preparing a deficit mitigation plan, which will be submitted within the statutory timeframe. I am also prepared to exercise my authority to begin making rescissions perhaps as early as this week.''
Senate Majority Leader Martin Looney, a New Haven Democrat, said, "Connecticut is getting hit with a powerful one-two punch right now. Not only do revenues continue to drop, but the governor is failing to make the spending cuts called for in the budget. As the comptroller states, about one third of the deficit is due to increased spending in the executive branch.''
Looney added, "It is critical that the governor not only follow through on cuts included in the budget, but also begin responsibly exercising her rescission authority. We remain committed to working with the governor to deal with this continuing economic crisis and look forward to receiving her deficit mitigation plan."
While Democrats placed the onus on Rell, the Republicans put it back on the Democrats.
"We should be in special session immediately - right now,'' said Senate Republican leader John McKinney of Southport. "Unlike a year ago, we have no rainy day fund, and there's no federal stimulus coming in our Christmas stockings. This is their budget. This is a Democrat budget.''
He added, "Just two months ago, Democrats, in the face of Republican warnings and without a single Republican vote, passed a partisan budget that, according to the Democrat Comptroller, is now $624 million in deficit. The Comptroller has also questioned the state's ability to realize another $473.3 million in unspecified savings.''
"The last time we faced a deficit of this magnitude, Democrats ignored Republican warnings, and the state ended up borrowing $1 billion to close the FY09 deficit, increasing debt service and mortgaging our future. We cannot continue to repeat past mistakes. Republican leaders again stand ready, willing and able to work with Democrats to finally do the difficult, but necessary work to reduce the size and cost of state government. We need the Democrat majority to stop ignoring reality and join us at the table."
Stamford Mayor Dannel Malloy, who is seeking the Democratic nomination to run against Rell, said it's time to solve the state's problems.
"Last week, the governor told a group of business leaders that 'the real budget wars are about to begin,' '' Malloy said. "The truth is, these aren't wars - they're incredibly important negotiations with implications for just about everyone in Connecticut, and life-altering implications for the people who need our help the most. They'll dictate what social services will be available, what it will cost each of us to live and work here, and what kind of state our children are going to inherit in the years ahead. And I have news for the Governor: this discussion isn't 'about to begin.' It began a long time ago, it's just that she decided to sit on the sidelines for most of it, clinging to a fantasy cooked up by her pollster in a focus group: that we could have a balanced budget without looking at revenue.
"Even though the Governor says we're about to go to 'war' over the budget, she's refused so far to take any of the actions she is empowered - some might say obligated - to take in order to bridge that gap. This might have been avoided had the budget debate begun in an honest fashion, but in February the Legislature was handed a budget that was already $2 billion in the red, and now... here we are.
"The question now is whether Connecticut will fall into the same old trap, frozen in place with a bulldozer bearing down on us,'' Malloy continued. "Or, will we finally decide it's time to stop passing the buck, own our problems, and start making the tough decisions that need to be made to get us out of this hole? It isn't too late - but we need to act now.''
Here is the big lie folks "...higher-than-expected unemployment and a weaker-than-expected economy..." Anyone who has taken Econ 101 knows you can predict with 100% certainty these results from the sort of irresponsible fiscal, monetary and industrial policies propogated by left-wing liberals, usually Democrats. The simple truth is that this state is doomed to endure a downward spiral for years, unless and until you replace the corrupt self-serving pols in this state (i.e. Dodd, Murphy, Glassman and numerous others) with true conservatives.
Why is this a surprise to anyone. Looney and Malloy and the rest of the dems along with the Governor knew this was coming. I think Governor Rell will retire. The 2010 state elections will be very interesting.
Everyone knew, Democrats and Republicans, that this budget was a "sham". No one wanted to make realistic decisions such as lay-offs, furlough days each month and spending cuts like closing John Dempsey hospital. Until we get serious about spending cuts and say NO to state agencies including the University of Connecticut we will forever be in the red.
Wwyne L. Urbanski
Cut the spending. Cut the spending. Cut the spending.
This will probably mean people on welfare (food stamps, etc) won't be able to buy $100's of groceries on the taxpayer dime every month. This probably means less social services provided by the state. This probably means less "free" medical care.
This probably means less teachers and education resources
This probably means a cut in pay for state workers
This probably means less fringe benefits and "other misc accounts"
This probably means (even) longer lines at the DMV
This probably means roads not getting repaired as quick as they should.
This probably means less police and less fire fighters
This probably means less committee's, commissions, offices, departments, councils, trust funds, boards, assemblies, onbudsmen, etc.
Cut the spending. Cut the spending. Cut the spending. We don't have the money. We are driving people out of the state by being one of the worst business environments in the country with all the taxes. We are driving people out of the state with all the property taxes.
The only ones left are the ones taking the money and not contributing.
STOP THE SPENDING. (have I emphasised that enough?)
If conservatives have all of the answers, why is the state so screwed up?
I think the answer to that question is that they do not have any of the answers, not that I think liberals do either.
Liberals want to spend money on social programs, which if they work at all, take time to work. Most Americans are not patient enough to wait on anything.
Conservatives want to spend money also, but only want to give tax breaks to corporations (which do not really exist), and build prisons and jails (which solve no problems.
We need people who want to solve problems, not espouse ineffective ideologies. It is time for the old guard to step aside. Whether consrvative or liberal. The old guard and their ideologies have failed the young MISERABLY. Step aside or be pushed aside.
This is rich. What happened to a balanced budget? Looney, Donovan and Williams all assured us the budget was balanced. When after the first month, it was out of balance and all of the political yahoos who can't count returned to Hartford to raise taxes again, we were told nothing more needed to be done. It was back in balance again. Half-way through month 2 of the new budget, the bond raters pointed out the state had major structural defects in its budget and gave more state borrowing the thumbs down. We were told not to worry. Now, the projected deficit worsens, nearly doubling at the end of month 2 - 60 days from getting the blessing of Democrats. Looney blames Rell. Malloy tries to be relevant by jumping on the bandwagon. These comments by Dem "leadership" are lame and flacid. When will all this nonsense stop and when will these people get down to the business of cutting spending? I've cut back. Why can't the state?
Mr. Mueller -
Dodd (US Senator), Murphy (US Congressman) and Glassman (First Selectwoman of Simsbury) have zero to do with the state budget.
Beau
Are these people serious. I am disgusted with the politicians running this state, Democrats, Republicans and Independents alike. When will these games stop? This isn't a surprise to anyone who has been paying even the slightest bit of attention to the financial news. I hopej everyone goes to the polls next year and REMEMBERS what these incumbents are doing to this state.