Economic Stability on Everyone’s Mind Inside and Outside the Capitol
The Legislature’s nonpartisan Office of Fiscal Analysis (OFA) today issued its annual fiscal report card for fiscal years 2017-2020.
In the short-term, OFA is projecting a Fiscal Year (FY) 2017 deficit of $77.5 million. The adopted FY 17 budget anticipated a surplus of $22.7 million. The new OFA deficit projection for 2017 is a result of a decrease in net (tax) revenue of $45.9 million coupled with projected deficiencies in five agencies totaling $54.3 million.
Things deteriorate sharply in 2018, however, when OFA is anticipating a $1.2 billion deficit. A major part of the problem is that state revenues, particularly income and sales taxes, continue to lag, while the state’s fixed costs such as pension payments, debt service and entitlements continue to grow. Because fixed costs represent 53 percent of the General Fund budget and cannot be adjusted by the Legislature, the $1.2 billion deficit must be balanced either by reducing non-fixed costs (which account for 47-percent of the budget) or by raising taxes, or some combination of the two.
Office of Policy and Management Fiscal Report for 2017-2019 Mirrors OFA’s
The administration’s Office of Policy and Management (OPM) also released their fiscal accountability report for FY17-FY19 today. A summary of OPM’s estimates are as follows:
OPM is estimating a $67.7 million shortfall for the FY17 General Fund. When OPM compares estimated costs for “fixed” components of the budget to the November consensus revenue forecast, fixed cost growth in the General Fund exceeds revenue growth for FY 2018 by nearly $1.3 billion– $100 million more than OFA. Beyond FY 2018, revenue and fixed cost growth are anticipated to be much more closely matched.
Governor Malloy is constitutionally obligated to present the General Assembly with a balanced biennial budget for FY 2018-19 in February. It will then be up to the Legislature to adopt a balanced budget based on their priorities, which are diverse.
The Governor said Tuesday that his budget proposal is still “a work in progress,” but that it will be very lean, without major tax increases.