Budget chief: State facing $365 million deficit

Hartford - Gov. Dannel P. Malloy's budget director confirmed Wednesday that the state's budget deficit has grown to about $365 million, requiring the governor to submit a deficit-cutting plan to the General Assembly.

In testimony before the legislature's Appropriations Committee, Benjamin Barnes said the new figure includes declines in expected state revenues and increased spending for Medicaid services. Barnes said the Office of Policy and Management has already begun work on a deficit-cutting plan for Malloy's consideration.

"While I'm not prepared today to address any elements that might or might not be included in that plan, you can expect that we will announce specifics as soon as possible," he said. Malloy has said he would not support raising taxes to cover the budget gap.

Meanwhile, Barnes said, his office will release new budget projections on Nov. 20.

Republican legislative leaders have accused the Democratic administration of trying to downplay the extent of the state's deficit. On Monday, Malloy told the Hartford Courant that it was "a little premature" to be discussing a deficit. The fiscal year ends on June 30.

Malloy said the state could receive a revenue influx if wealthy state residents sell off stocks and report capital gains before any federal income tax increases kick in on Jan. 1. There is a debate in Washington over whether to extend tax cuts from President George W. Bush's era for wealthier taxpayers.

Barnes said Wednesday that it's possible the state may receive additional revenue. At the end of 2010, when there was also uncertainty about the tax rates, Connecticut residents reported a very large amount of capital gains and dividend income that led to a budget surplus, he said.

"We've not counted on that revenue, although I'm hopeful that when we revisit it in January, we will see evidence that that phenomenon has occurred and be able to forecast that revenue. For now, it is a possibility," he said.

The GOP was upset last week when Barnes announced that the latest estimates from the legislative and executive branch budget offices showed that Connecticut's tax revenues had fallen by $52.7 million since April, when the last revenue estimates were released.

House Minority Leader Lawrence Cafero Jr., R-Norwalk, accused the administration of trying to "put lipstick on a pig" and said it should have revealed the total deficit figure. Cafero contends the state is in "very difficult fiscal shape."

Barnes has said the slumping revenue figures are "not surprising given the continued sluggishness of the national economic recovery."

During Wednesday's hearing, Barnes said the General Fund, the state's largest account, is currently short by about $260 million. He attributed it to growth in the Medicaid program, explaining how caseloads have increased, in addition to spending on hospital and nursing home care.

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