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Capitol Update: Estimated $1 Billion Deficit and Counting

COVID 19 pandemic update: At yesterday’s COVID-19 briefing, Governor Lamont had the two co-chairs of the Reopen CT Advisory Board available to answer questions and discuss the possible timelines for the reopening of non-essential businesses and easing of social distancing. The Reopen CT advisory group was assembled to examine issues concerning how best to allow Connecticut’s economy to reopen, while protecting the state’s public health and well-being. The chairs are Indra Nooyi, former chairman and CEO of PepsiCo, and Albert Ko MD, Department Chair and Professor of Epidemiology and Medicine and a department chair at the Yale School of Medicine. It was announced yesterday, April 30, that on May 20, the following businesses will be allowed to re-open, with conditions, if the positive disease trend continues.  The openings will be on a limited basis, with protocols to be announced.  They include:

  • Restaurants (outdoor service only)
  • Remaining retail
  • Offices (continue to work from home) appointed council charged with coming up Personal services (hair and nail)
  • Museums and zoos (outdoor only)
  • Outdoor recreation
  • University research programs.

The targeted May 20th limited openings are planned to be the 1st of 4 stages of re-openings, with no less than 4 weeks between stages. Each stage will further loosen restrictions as long as positive disease trends continue.

The Governor’s Reopen Ct advisory board was not without controversy: While Yankee Institute was appreciative of the Governor’s effort to convene a working group, we were vocal regarding our disappointment in the group’s transparency and called for more clarity from Lamont’s task force about how Connecticut will proceed to reopen. Yankee, along with others, has called for the Reopen CT advisory group to be subject to public meetings and the Freedom of Information Act.

Budget update: We knew the upcoming revenue forecast was almost certain to be ugly due to the economic downturn caused by the COVID 19 pandemic. It is no shock the numbers are much worse than earlier projections. Budget numbers released yesterday by the Office of Fiscal Analysis estimate a more than $1 billion deficit for this year. OFA predicts a decline in state revenues of approximately $7 billion in the present until midway through 2023.

We need to keep in mind these figures are just estimates, due to the extension of the tax filing deadlines and the effects on the economy due to COVID 19. Connecticut’s true budget deficit will not be known until later in the summer months. Connecticut currently has $2.5 billion in its reserve “rainy day” fund, but that will not last long as this year’s deficit will require a transfer from the fund, leaving $1.8 billion in the fund heading into the next fiscal year.

How will these staggering budget deficits be addressed? Governor Lamont stated today anticipated tax relief will be canceled, and $400 million in emergency spending cuts for the next fiscal year will be passed via a special session sometime in June. The Governor also implied there are other measures he may take up, including a possible gas tax increase, and another round of possible state employee concessions by “sitting down with labor”.

Possible Tax relief cancellations: Approximately $100 million in previously approved tax cuts could be canceled.  Although specifics weren’t cited, they could include many measures that would’ve provided tax relief to businesses this year, like maintaining the 10% surcharge on the corporation tax was set to expire after this year; maintaining the $250 biennial registration fee also known as the “business entity” tax; and canceling the planned expansion of the angel investor tax credit program.

New Proposals for relief: Yankee Institute recently released a comprehensive series of policy proposals to point the way toward reform and mitigate the economic and fiscal fallout from the COVID-19 pandemic during and after the crisis.  Pandemic Policy Papers: COVID-19 Relief and Recovery Plan for Connecticut.  Gov. Lamont’s most helpful actions during the pandemic – removing burdensome taxes and regulations–prove that our state’s struggling economy would benefit from these measures all the time, not just during an emergency. If there is a “Beam of Light” in addition to the heroic efforts we’ve seen exhibited during this crisis by the citizens of Connecticut, it is the mad scramble to reform bad policy, do away with unnecessary and burdensome regulations, and embrace the best ideas and policies moving forward. The 2020 legislative session may be over, but the COVID 19 pandemic and the astronomical and unprecedented budget deficits Connecticut faces means the policy work has only just begun.

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  1. Covid-19

    May 2, 2020 12:57 pm

    The president conceded that there was no consensus yet on how to proceed with the economic rescue package. “The consumer is ready, and the consumer is so powerful in our country with what we’ve done with tax cuts and regulation cuts and all of those things,” he said. “The consumer has never been in a better position than they are right now. So a lot of good things are going to happen.”

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