Connecticut comptroller Kevin Lembo reported a projected General Fund deficit of $279.4 million for fiscal year 2016, an improvement of $36.4 million. The final unaudited fiscal 2016 numbers will be available on September 30, with a final audited report released before the end of the calendar year.
In his letter to Gov. Dannel P. Malloy, Lembo cited one-time revenue from federal grants as the primary impetus for improvement, but expressed concern over the continued volatility of income tax receipts.
“Connecticut continues to recover at a slow pace,” Lembo said. “Market volatility, and lower than anticipated wage growth, have led to significant shortfalls in income tax receipts and negated progress made in other areas of the economy.”
Income tax revenue is $659.4 million short of the original nonpartisan consensus revenue projections. The state’s Budget Reserve Fund currently holds a balance of $406 million.
“Our reserves are currently sufficient to cover the projected deficit, but there is little room for error,” Lembo said. “I will be watching revenue accruals closely over the coming months, and Medicaid expenditures through August.”
Erratic reports on job and wage growth – both locally and nationally – have complicated the forecasting process, the comptroller said.
“Having dependable data leads to more reliable projections and, in turn, better policy decisions,” he said. “I am concerned about the veracity of the job numbers in particular, as they have been significantly and continuously adjusted in recent months.”
Lembo will begin reporting early projections for fiscal year 2017 next month.