HARTFORD, CT - In response to consensus revenue figures announced today by the Office of Policy and Management (OPM) and the Office of Fiscal Analysis (OFA), Governor Dannel P. Malloy directed OPM Secretary Ben Barnes to develop a budget management plan that will limit spending to available resources in FY12.
“Last year at this time, we were staggering under the weight of a 3.5 billion dollar deficit,” said Governor Malloy. “As a result of the actions we took last year, we eliminated that deficit, and we did it honestly. All today’s announcement means is that, as is the case in other states with high wage earners, fourth quarter revenue is coming up short of expectations. That’s why today, I’ve instructed Secretary Barnes to pare back on current year expenses. But let there be no confusion – we will end the current fiscal year in the black, and in a more stable fashion than this state has seen in many years.”
The agencies today announced an agreement on consensus revenue that shows a decline of $94.9 million in FY12 or one-half of one percent of the annual budget. Additionally, the estimates for FY13 show a decline of $139 million or seven-tenths of a percent of the annual budget.
According to OPM, the decline in revenue is almost entirely due to a decline in income tax revenue, particularly among higher income taxpayers that file quarterly returns, a trend that is occurring in New York, New Jersey, Massachusetts and California. The most likely explanation is that this is a result of taxpayers shifting capital gains and income as a result uncertainty at the federal level, specifically the uncertainty surrounding the extension of the Bush-Era tax cuts. Declines in bonus levels in the financial service industry are also a contributing factor.
The FY13 consensus revenues will be the basis for the Governor’s mid-term adjustments, which will be announced on February 8. A copy of Governor Malloy’s letter to Secretary Barnes is attached.
