State falls deeper into budget hole

WINSTED — Connecticut residents hoping the state’s financial situation would improve this year received news to the contrary this week when state Comptroller Nancy Wyman announced the projected deficit at the end of the 2010 fiscal year will be $624 million, or $235 million more than the most recent estimate by Gov. M. Jodi Rell.

The announcement also came with disappointing news for consumers, as Wyman said the deficit will require the elimination of a proposed sales tax cut. The sales tax was scheduled to drop from 6 percent to 5.5 percent on Jan. 1.

“Although I see a slight improvement in revenues occurring toward the end of the fiscal year, my projection takes into account the accelerating job losses, high unemployment and decline in personal income that Connecticut residents are seeing now and can expect to see in the near future,� Wyman said in a statement released Monday.

Wyman noted that tax payments made quarterly by investors and others based on their estimated year-end income were down 29 percent in September, with total revenue down by $407.6 million.

“That is more than double the revenue drop that would trigger the cancellation of a planned one-half percent reduction in the sales tax that was approved by the General Assembly in its 2010 budget,� she said.

For Connecticut towns, the announcement comes as a harbinger of potentially more painful cuts to follow during the current fiscal year, according to Winsted Town Manager Keith Robbins, who said significant reductions in spending will be necessary for the state to get into the black.

“I would hope the Legislature would come back into session in late November or early December to make changes to the budget because the state cannot continue to operate this way,� Robbins said. “And depending on what happens with town aid, that will determine what happens at the local level.�

Robbins said Winsted residents may have to brace for further cuts to town aid in the form of services, schools, road repairs and even personnel.

“People would still like us to provide services and we still need to maintain our infrastructure at some level, so it will not be an easy discussion,� he said. “If nobody has the money to provide services, the services will need to be reduced, along with personnel.�

Wyman announced last month that she believed the state would be at least $500,000 in the red after the governor’s office estimated the shortfall to be slightly more than $300 million. Job losses and weak collection of income taxes were cited as primary factors contributing to the deficit.

While the situation for everyone looks bleak, Robbins said towns and states all over the country are experiencing the same pain.

“It’s local, it’s state, it’s federal — it’s everywhere,� he said. “We as a state and country spend too much money. You can’t blame it all on Wall Street or car manufacturers or real estate. It’s everybody.�

The state’s two-year $37.6 billion budget was enacted Sept. 1 without Gov. Rell’s signature, two months after the current fiscal year began. Since then, the governor vetoed a budget implementer bill, which she said the state could not afford, and announced that the state’s General Obligations bond outlook issued by Moody’s Investor Services had been downgraded from stable to negative.

Moody’s said the downgrade was a result of the adopted two-year state budget, which relies on borrowing and one-time stimulus funds to balance accounts. Rell called the bond downgrade “an alarm signal that we clearly cannot afford to ignore� and said further reductions in state spending will be necessary.