Lawmakers on the General Assembly's two top financial committees on Tuesday got a long, hard look at the state's developing $1.2 billion budget deficit.
During a multi-hour hearing, they got their arms around the tip of the iceberg: a $365 million shortfall in the spending package.
Benjamin Barnes, secretary of the Office of Policy and Management, told lawmakers that cutting spending in the current $20 billion package will make it easier to tackle the larger flood of red ink in the two-year budget set to take effect July 1.
He declined to reveal plans that he and Gov. Dannel P. Malloy are exploring to address the $365 million shortfall.
"The governor is committed that the state live within its means," Barnes said. "We recognize that that will involve hard spending cuts and that we do not favor tax increases as a way of increasing our means in the current environment. It's going to be a very tough budget. There's no question."
The hearing before a joint session of the Appropriations Committee and the Finance Committee included a review of tax forecasts and spending summaries. Barnes said he has given no consideration to eliminating tax loopholes to enhance revenue, but the issue may be looked at before Malloy offers his next two-year budget in February.
"I think that we are certainly not looking to say, `OK, we have a billion-dollar hole, let's raise taxes by $500 million, which means we only have to cut spending by $500 million,' " Barnes said. "We are not going to do that."
He said Connecticut's lingering recession may not finally be overcome until next fall, more than six years after the start of the 2008 recession and more than 50 percent longer than the usual four-year turnaround cycle following an economic slump.
"There is no question that we have had a slower-than-normal economic recovery," Barnes said. "This recession has had a longer and deeper impact on state revenues than the 2002 recession."
Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the Finance Committee, said with the dire state of the budget, Malloy, should consider a so-called means test as a way to get Medicaid benefits to the state's poorest.
Medicaid costs have increased to more than $5 billion in the current budget, from $3.4 billion in 2006.
"Certainly, we don't want to discourage people who really need help from applying," Widlitz said. "We're looking at some dire circumstances here. Our expenditures are outpacing our revenues, and that's a pretty strong message here."
Widlitz said she was disappointed by the inability of states to collect tax revenue from Internet sales that could bring the state between $9 million and $150 million a year.
"We are keenly interested in collecting taxes on Internet sales," Barnes said, noting that the General Assembly has made attempts to gather taxes on digital sales. But unless there is federal law or agreement from Internet merchants such as Amazon.com, progress will be slow.
"There was a lot of room for optimism when Amazon essentially agreed to locate some of its facilities in California and file taxes for the state of California," Barnes said. "So far, that has not occurred in a way that produced tax collections here in Connecticut, and we hope it may."
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