STATE OF CONNECTICUT
NANCY WYMAN COMPTROLLER	OFFICE OF THE STATE COMPTROLLER 55 ELM STREET HARTFORD, CONNECTICUT 06106-1775	MARK OJAKIAN DEPUTY COMPTROLLER

State Comptroller Nancy Wyman today projected the state will end the 2009 fiscal year with a deficit of $107.9 million, and cautioned that the budget gap will likely grow when the full impact of the current economic downturn is realized.

Wyman said that significant equity losses and rising unemployment have not been fully incorporated into the revenue-collection information used to make the current projection, which matches that of the governor's budget office. A more accurate fiscal picture will develop in January, she said, when quarterly estimated income tax payments are posted and other revenue categories begin to reflect the economic slowdown.

Wyman noted that each one-percent drop in the income tax creates a revenue loss of approximately $75 million.

"While this projection accurately reflects the revenue collections through the first quarter of this fiscal year," Wyman said, "it is clear that the recent economic trends are going to continue to have a very negative impact on the state's books."

Among those major trends are:

• Equity markets have dropped approximately 40 percent since January, which is eroding collection of capital gains taxes.
• The state has lost 3,500 jobs since the start of the fiscal year; the unemployment rate of 6.1 percent is at a 15-year high, and job losses are expected to continue through the summer of 2009.
• Retail sales continue to decline on a month-to-month basis.
• Corporate profits continue to show negative results.
• Existing home sales are at a 12-year low.
• A decline in collection of taxes on fuel due to reduced consumption and weak automobile sales-tax collections has dropped the state's Transportation Fund into a deficit of $41.9 million.

In her monthly economic report to the Governor, Wyman said that the current deficit is based on assumptions built into the Governor's recent deficit-mitigation plan, including the collection of $157 million in retroactive federal billings and $251.9 million in spending reductions being achieved.

The Comptroller also urged the Governor to work with the legislature to adopt policies that will reduce both the current revenue deficit and a "structural" budget imbalance of an additional $500 million. And she again recommended the plan include using a portion of the $1.4 billion Rainy Day Fund.

Wyman noted that in fiscal 2002, the majority of the final General Fund deficit of $817 million was not projected until the final quarter of the fiscal year. By that time, little could be accomplished with additional mitigation efforts and the Rainy Day Fund's total balance of $594.7 million was emptied.

"Delaying action on the total deficit now will increase the probability of an uncontrolled drain of the Rainy Day Fund, Wyman said. "The approach that I recommended last month would both control and limit the use of the fund while avoiding potential tax increases."

The $107.9 million deficit is based on an overall budget of $18.4 billion.

The State Comptroller appreciates input on this and other issues from residents of the state. Please feel free to contact her office by phone - (860) 702-3300; mail - OSC, 55 Elm Street, Hartford, CT 06106; or, via E-mail - osc.opinions@po.state.ct.us

Learn more about the Connecticut Comptroller's Office by calling up our Internet Home Page, at the link below.

For Immediate Release
November 3, 2008

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