The Capitol Beat: November 20

November 20, 2017

With the ink barely dry on the recently enacted 2018-19 budget in late October, as well as a bill aimed at addressing hospital taxes, and millions in holdbacks issued by the Governor last Friday, today we learn the state deficit for 2018 continues to grow.

State law requires that when the deficit reaches 1% of the total budget bottom line, or about $20 billion in FY18, the Governor must craft a Deficit Mitigation Plan (DMP) for the Legislature’s review to temporarily stop the bleeding.

In his letter to the Comptroller issued today, OPM Secretary Ben Barnes, indicated he projects a deficit of about $202 million in FY18, which he attributed to several factors:

  • Reductions in federal revenue of $142.1 million
  • Drops in projected income tax receipts.
  • Reductions in projected sales taxes.

Finally, on one final sour note, Secretary Barnes wrote:

“As more information regarding the impact of the adopted budget on agency operations becomes available, further revision of these estimates is expected in the coming months. Notably, the very challenging level of lapses to be achieved in the adopted budget, along with underlying level of appropriations in several agencies, including the Comptrollers’ fringe benefits accounts, may lead us to increase our deficit projection.”

At this stage we don’t know whether the Legislature will convene in Special Session to address the DMP, or wait until the next session begins in February to make the necessary adjustments.
The Governor’s office expressed concerns that the 2018-19 budget that was adopted, and which he signed, was not in balance.

In all likelihood the Governor will issue rescissions as part of the DMP, which will automatically become effective based on his current authority.

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