Business Week – Connecticut Governor Dannel Malloy is learning you can’t always count on the rich.
The Democrat last month deferred debt payments, trimmed programs and diverted funds as tax revenue came up short and opened a $200 million budget hole. The gap emerged about a year after Malloy, 56, who was elected in 2010, signed a $2.6 billion tax increase, the biggest in state (STOCT1) history.
Connecticut, the wealthiest U.S. state, joins California and New Jersey in facing a deficit as income-tax revenue is the most volatile in at least 30 years, according to the Federal Reserve Bank of Chicago. Connecticut counts on the levy for almost half its revenue, with the biggest chunk coming from the hedge fund capital of Greenwich. Connecticut debt has posted the weakest returns this year among U.S. states, Barclays data show.
The shortfall “is just the consequence of loading up on high-income individuals,” said Philip Fischer, who runs eBooleant Consulting LLC in New York and formerly headed municipal-bond research at Bank of America Merrill Lynch. “It is destabilizing. They have very volatile incomes. The states have that reflected in their budgets.”