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January 21, 2015

Projected CT deficit grows, cuts coming

Falling gas prices are good for consumers' wallets, but bad for the state budget.

Gov. Dannel P. Malloy’s administration will be announcing a second round of mid-year budget cuts as the state’s projected deficit for the current fiscal year nearly quadrupled in size, the Office of Policy Management said.

OPM is now projecting a general fund deficit of $120.9 million for the fiscal year ending June 30. That’s up more than $89 million from last month’s projection.

“We will announce additional rescissions in the very near future, and additional actions may be required to address the projected change in operating balance,” OPM Secretary Benjamin Barnes wrote in a letter to Comptroller Kevin Lembo.

Malloy announced $54.7 million in rescissions in November, but the move only reduced the deficit by $24.6 million.

The steep increase in the deficit over the past month is mostly the result of Medicaid deficiencies and falling gas prices.

The state’s Medicaid deficiency grew by $50 million, to $120 million. Barnes said the growing shortfall is the result of increased enrollment, difficulties in achieving savings on administration, additional hospital cost settlements, and revisions to the federal government’s share of the costs for a small percentage of beneficiaries.

Meanwhile, falling oil prices have led to a $24.8 million drop in the state’s oil companies tax.

That tax is required to generate $379.1 million for the special transportation fund this year, but budget officials expect it to fall short.

As a result, a consensus forecast last week from OPM and the Office of Fiscal Analysis included an $18.8 million transfer from the general fund to the transportation fund.

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