By Keith M.Phaneuf

www.ctmirror.org

With Connecticut’s new fiscal year set to begin Friday, serious issues — involving both spending and revenue — have arisen in recent weeks that challenge state government’s new spending plan before it’s even begun.

And a major Wall Street credit rating agency questioned Monday whether Connecticut’s fiscal house is in order, If not, the state could face its third consecutive year of deficits.

“With weak tax collections likely to carry over into fiscal 2017, the state has limited flexibility to maintain a balanced budget,” Moody’s Investors Service wrote in its latest Credit Outlook newsletter.

“Budget reductions are especially challenging to achieve in Connecticut, where fixed costs — the sum of pension contributions, retiree health contributions and debt service payments — claimed more than 25 percent of the state’s own-source governmental revenue in fiscal 2014.”

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By Keith M.Phaneuf

www.ctmirror.org

Eroding state income tax receipts identified today by Gov. Dannel P. Malloy’s administration not only widened the deficit in the outgoing fiscal year, but threatened to punch a hole in the new state budget 12 days before it begins.

Malloy’s budget office announced the red ink in the 2015-16 finances worsened over the past month by $56.7 million — a problem driven largely by a $75 million drop in projected income tax receipts.

And since prior year’s income tax receipts are a crucial factor used to project likely revenues in the following year, the new forecast raises questions about the stability of the $19.76 billion budget Malloy and legislators approved recently for the fiscal year beginning July 1.

“We’re facing a sustained period of slower-than-normal growth as we adjust to this new economic reality,” Office of Policy and Management Secretary Benjamin Barnes, the governor’s budget chief, wrote in a statement. “… We are committed to making difficult choices to reduce spending throughout the end of this fiscal year and into the next.”

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