November 22, 2017

Moody's: CT may have to raid surplus to close mid-year deficit

The State Capitol in Hartford.

Moody's Investor Service issued a report Friday suggesting Connecticut may have to tap into its $213 million rainy day fund to ease the projected mid-year $202 million budget gap for fiscal 2018.

State officials on Monday said a newly projected revenue shortfall is the major contributor to a $202 million mid-year budget gap for the 2018 fiscal year. The budget gap is large enough to trigger the state's procedures for implementing a deficit mitigation plan that would require legislative approval, said Marcia Van Wagner, a Moody's senior credit officer.

"Continued economic sluggishness has led to lower than expected personal income and sales tax revenues so far this fiscal year," she said. "Mid-year solutions may more likely be nonrecurring in nature and could potentially involve tapping the state's $213 million rainy day fund."

If that step is taken, it would still leave future gaps that would have to be addressed in fiscal 2019, she said.

Total general fund revenues are anticipated to fall short by $227 million in fiscal 2018 and by $263 million in fiscal 2019.

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