New Estimates Give Malloy, Legislators a $1.5 Billion Hole to Deal WithMay 2, 2017
May estimates of tax revenue in Connecticut show a freefall from January, meaning the governor and legislators are expected to cut spending, raise taxes, or both to bring the budget into balance.
In the latest sign Connecticut’s budget is in a ‘death spiral,’ analysts at Gov. Dan Malloy’s (D-Conn.) office and the legislature agreed on Monday that tax revenue will be $1.5 billion less in the next two years than they expected in January.
The May estimate of General Fund revenue for fiscal year (FY) 2018 (which runs October 1, 2017 through September 30, 2018) is $17.085 billion, down from a $17.682 billion estimate in January. For those keep score at home, that means Connecticut is expecting $597 million less in revenue now than it did in January.
What’s worse? The May estimate of General Fund revenue for FY 2019 (which runs October 1, 2018 through September 30, 2019) is $17.173 billion, down from a $18.038 billion estimate in January. That means Connecticut is expecting $909 million less in revenue now than it did in January.
What does this add up to? More than $1.5 billion less in tax revenue over the next two years than the state expected just five months ago.
INCOME TAXES AT FAULT
This is mostly due to plummeting income tax projections: $642 million less in FY 2018 and $819 million less in FY 2019.
The budget of Gov. Dan Malloy (D-Conn.) projected $9.859 billion in income tax revenue, which included $120 million in new taxes collected by eliminating a $200 property tax credit to Connecticut homeowners.
But even with Malloy’s $320 million in tax and fee increases, the new projections mean his budget is at least $600 million out of balance for next year.
The governor, and Democratic leaders in the legislature, will have to decide whether to make up the gap with spending cuts, tax increases, or both.
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