Escalating Medicaid spending and slow personal income growth is helping to fuel a projected $27 million state budget deficit, State Comptroller Kevin Lembo has reported.
In a letter Monday to Gov. Dannel Malloy, Lembo said that general spending by the state next year is on track to be $80 million in the red. The state’s budget deficit, Lembo said in his letter, is higher than expected in part because Medicaid spending by the state’s Social Services Department is on the rise. That department’s budget, Lembo said, currently has a $100 million deficit and added 1,700 new Medicaid cases in August, he said.
The state ended the 2011-12 fiscal year with a deficit of $143.6 million. The deficit was paid down using the state's reserves.
Connecticut’s economy continues to make a sluggish recovery, Lembo said in his letter.
“In August, Connecticut lost 6,800 payroll jobs. For the full twelve-month period ending in August, the state has added a scant 1,100 jobs,” he wrote. “Since the recovery commenced at the beginning of 2010, Connecticut has regained about one quarter of the jobs lost to recession.”
In addition, the state’s unemployment rate rose to 9 percent in August, higher than the national rate of 8.1 percent, and Connecticut’s average hourly earnings were down 1.1 percent. Weekly private sector pay fell 1.4 percent, Lembo wrote.
While revenue from the state income tax has continued to show “positive movement,” the state’s earning losses, Lembo said, are worrisome.
“I am especially concerned with the sales tax trend in light of slower personal income growth in the state,” he wrote. “The state’s income growth ranking fell from thirteenth highest in the nation to thirty-fourth. Sales tax receipts have historically shown a correlation to personal income, so this trend is of concern.”
You can view a PDF of Lembo's letter above.