State Comptroller Kevin Lembo has reported that, following spending rescissions last month, the state is on track to end the current fiscal year in deficit by $325.4 million. The Budget Reserve Fund has a balance of $235.58 million, which is insufficient to cover the deficit, he said.
In a letter to Gov. Dannel Malloy, Lembo said that his deficit projection remains slightly higher than the deficit reported by the Office of Policy and Management because Lembo believes the state will spend more than initially planned on ongoing settlement payments related to the SEBAC vs. Rowland case, which involves ongoing recompense for then-Gov. John Rowland’s 2003 layoffs of over 2,000 state workers.
Lembo cautioned against borrowing to close the deficit, as the state continues to bear the burden of that approach from several years ago.
“Connecticut cannot afford to repeat past mistakes that continue to burden our budgets today,” Lembo said. “The state should avoid using economic recovery notes to finance any residual deficit, as interest rates are likely to rise and the state continues to pay the costs of debt service payments on $915.8 million in recovery notes that were issued in 2009 to close a deficit at that time.”
A portion of those economic recovery notes were refinanced in October 2013. The remaining balance on those notes at the end of fiscal year 2016 was $352.6 million, with a payment this fiscal year of $167.7 million.
Lembo also said that the state’s population loss has likely contributed to downward pressure on state tax receipts.
On the spending side, the state is on track to spend $57.1 million below its budget plan, he said.