Governor Rell: Deficit Estimate Tops $1 Billion for ’09;

New Estimates Put 2010-11 Shortfall at $7.95 Billion

            Governor M. Jodi Rell today announced that her budget office – using the most up-to-date numbers on income taxes and other revenues – now estimates the current year’s budget deficit has increased to about $1.056 billion. In its monthly letter to the state Comptroller, the Governor’s budget office also released new estimates of the deficit for the next two fiscal years, putting the shortfall over the biennium at $7.95 billion.

            “The national recession continues to hurt Connecticut’s economy, aggravating this deficit for the budget year ending June 30 despite continuing efforts to get it under control,” Governor Rell said. “The economic clouds also continue to cast a serious shadow over state finances for the next two fiscal years. However, with these updated numbers, we now have a much clearer picture of the road ahead – and the steps we need to take to bring state spending in line with our ability to pay for it.”

            Governor Rell has taken a number of cost-saving steps since last year, including four rounds of state agency rescissions, a ban on out-of-state travel, a hiring freeze and a ban on nonessential purchasing. The Governor has presented three deficit mitigation plans to the Legislature and asked them to work with her in drafting a fourth plan.

            OPM estimated the deficits for the next two fiscal years at $3.972 billion in Fiscal 2010 and $3.981 billion in Fiscal 2011, for a total of $7.953 billion.

            The revised estimate for the next biennium does not reflect potential revenue from the federal stimulus. Neither the current-year figure – up from an estimate of $667 million last month – nor the estimates for Fiscal 2010 and 2011 reflect potential savings from an agreement with the State Employees Bargaining Agent Coalition (SEBAC). Governor Rell announced today that leaders of the state employees unions have voted in favor of a draft agreement, sending it to rank-and-file members for their consideration.

            The Fiscal 2009 estimate also does not reflect any potential savings from the Legislature’s review of unappropriated or “off-budget” accounts intended to find as much as $220 million to help reduce the current deficit, or the use of any additional money from the “Rainy Day Fund.”

            The estimates from the Office of Policy and Management reflect severe reductions in income tax collections and income tax withholding. However, a final figure on income taxes will not be available until the end of April, when all of the returns have been received, processed and tallied.

            “Even with the savings we hope to achieve from the agreement with SEBAC and any potential savings from the effort to find $220 million in savings from unappropriated funds, it is painfully clear we still have a great deal of work to do to get this year’s finances in order,” Governor Rell said. “I realize there is a great deal of attention now being focused on drafting a comprehensive budget for the next two years – but we cannot afford to simply throw up our hands when it comes to closing the gap in our current year’s budget.”

            Earlier this month, Governor Rell wrote legislative leaders to ask that they meet with her Administration to craft a truly bipartisan deficit mitigation package that could be passed quickly. April marked the start of the last three months of the fiscal year and savings from a deficit mitigation plan – if implemented quickly – could help reduce the shortfall before the new budget year begins on July 1.