The Capitol Beat: December 1, 2017

The Comptroller today issued a letter to the Governor on the 2018 projected deficit that will require the Governor to submit a Deficit Mitigation Plan (DMP) to the legislature. The comptroller has officially certified the size of the deficit at $207.8 million, based upon information provided by the Governor’s budget office.

This certification triggers the statute that calls for the Governor to produce a DMP, which can include: 1.) 5% rescissions from the Governor, and 2.) spending cuts and revenue proposals, which would require legislative approval.

State law requires that when the deficit reaches 1% of the total budget bottom line, which was about $20 billion in FY18, the Governor must craft a DMP.

In his letter to Gov. Dannel P. Malloy, Lembo reported a deficit that is close, but slightly higher, than a deficit reported last month by the Office of Policy and Management (OPM) because Lembo said he expects a larger $20-million deficiency in the state’s adjudicated claims account used to pay claims and attorney fees associated with the SEBAC v. Rowland settlement.

Another level of concern, is “the aggressive level of savings included in the adopted budget,” Lembo said. “Achieving these lapses – or savings – targets will be a significant budgetary challenge, especially in light of the high levels of fixed costs for FY 2018, such as debt service payments, pension contributions and other costs.”

In November, OPM projected a deficit of $202 million in FY18 and attributed it to several factors:

  • Reductions in federal revenue of $142.1 million
  • Drops in projected income tax receipts.
  • Reductions in projected sales taxes.

The Governor is expected to meet with legislative leaders on December 6 about a DMP. It remains to be seen if the Legislature will need to come into special session to deal with the ongoing fiscal crisis. Stay tuned.

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