Will Gov. Ned Lamont cancel tax relief and impose $400 million in emergency spending cuts to mitigate the multibillion-dollar deficit, caused mainly by the coronavirus shutdown, projected for the upcoming fiscal year? He has said as much. Huge numbers of state residents are out of work and the state is missing out on all that income tax and sales tax revenue.
Will he also impose a gasoline tax hike and another round of state employee give-backs, as he has hinted?
What is clear is that the present medical crisis has plunged the nation into a fiscal crisis like nothing in living memory. The federal government has already taken drastic action by pumping trillions of dollars into the economy. Meanwhile, extending the tax deadline by three months — and maybe even longer — means federal tax receipts, too, are lacking.
As for state revenues, analysts project they will decline by a staggering $7 billion between now and mid-2023. That translates to a $934 million deficit this fiscal year and $2 billion-plus shortfalls through fiscal 2022-23.
“I'm sorry to ask everybody, but we're going to have to do a little more on this fiscal front,” Lamont said.
Lamont plans to cancel about $100 million in previously approved tax cuts. A 10 percent surcharge on the corporation tax was supposed to expire after this year, but that relief might be deferred. Additional tax relief adding up to $57 million might also be eliminated. The administration is looking to find at least another $400 million in spending cuts for next fiscal year at a special legislative session in late June. Still, it is projected that the state can expect $4 billion less in revenue than originally anticipated for fiscal 2021-22 and 2022-23.
Is Lamont ready to ask the unions for concessions? Is he willing to go further and use whatever emergency powers and political leverage he may have to delay the $353 million State Employees Bargaining Agent Coalition wage hike that’s set for July 1?
“We're going to have to streamline things, make some cuts [and] work in collaboration with our friends in labor,” he told a reporter for The Connecticut Mirror recently.
We should all be prepared for tax hikes, service cuts or labor concessions — or all three.
This is not a problem. This is a crisis.