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Connecticut Budget Deficit Projected at $27 Million

State Comptroller Kevin Lembo also says the state's economic recovery remains sluggish, Medicaid spending is on the rise and he's worried about sales tax revenues.

Escalating Medicaid spending and slow personal income growth is helping to fuel a projected $27 million state budget deficit, State Comptroller Kevin Lembo has reported. 

In a letter Monday to Gov. Dannel Malloy, Lembo said that general spending by the state next year is on track to be $80 million in the red. The state’s budget deficit, Lembo said in his letter, is higher than expected in part because Medicaid spending by the state’s Social Services Department is on the rise. That department’s budget, Lembo said, currently has a $100 million deficit and  added 1,700 new Medicaid cases in August, he said.

The state ended the 2011-12 fiscal year with a deficit of $143.6 million. The deficit was paid down using the state's reserves.

Connecticut’s economy continues to make a sluggish recovery, Lembo said in his letter.

“In August, Connecticut lost 6,800 payroll jobs. For the full twelve-month period ending in August, the state has added a scant 1,100 jobs,” he wrote. “Since the recovery commenced at the beginning of 2010, Connecticut has regained about one quarter of the jobs lost to recession.”

In addition, the state’s unemployment rate rose to 9 percent in August, higher than the national rate of 8.1 percent, and Connecticut’s average hourly earnings were down 1.1 percent. Weekly private sector pay fell 1.4 percent, Lembo wrote.

While revenue from the state income tax has continued to show “positive movement,” the state’s earning losses, Lembo said, are worrisome.

“I am especially concerned with the sales tax trend in light of slower personal income growth in the state,” he wrote. “The state’s income growth ranking fell from thirteenth highest in the nation to thirty-fourth. Sales tax receipts have historically shown a correlation to personal income, so this trend is of concern.”

You can view a PDF of Lembo's letter above.

Khan October 03, 2012 at 01:55 PM
We need better leaders who can bring the taxes down not up.
Concerned Parent October 03, 2012 at 03:17 PM
There must be a lot of state residents who do not possess any basic math skills...The only way to support this state's lack of fiscal responsibility is to raise taxes. When these idiots push more taxes on hiring companies, they simply cut jobs and put an additional burden onto an already broken state...Basically, we are all _____
Vicki Grande October 05, 2012 at 03:52 PM
Phil.The State instituted this already(With NO spendig reduction just increases)According to the Yankee Institute, the State of Connecticut will impose at least 77 separate tax increases over 24 categories as part of the changes recently made by the General Assembly, including: 1. Raises income tax on individuals making as little as $50K and couples making at least $100K a. Expands the number of brackets from 3 to 6 b. “Bracket Creep” shifts many taxpayers into higher brackets c. Highest marginal rate rises from 6.5% to 6.7% d. Phases out the 3% tax bracket for taxpayers with CT AGI of over 56,500 for individuals, $100,500 for joint filer, e. Income tax hikes retroactive to January 1, 2011 2. Recapture Provision for high income earners effectively flattens the income tax rate on high income earners for the entire amount of their income 3. Property tax credit reduced from $500 to $300 and phased out for couples over $100,500 4. Sales and Use Tax – Increased the general sales and use tax rate from 6% to 6.35% 5. Eliminates Sales and Use Tax Exemptions for: a. Hazardous waste removal b. Valet parking at any airport c. Yoga instruction at a yoga studio d. Clothing and footwear costing less than $50 e. Non-prescription drugs and medicine f. Cloth or fabric for non-commercial sewing g. Property or services used in operating solid waste-to-energy facilities h. Yarn 6. Expands the Sales and Use Tax and many more..

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