Connecticut readies austerity budget vote, aims to cut around $1 billion

NEW YORK (Reuters) - Connecticut's lawmakers are aiming to pass an austerity budget for the coming financial year on Wednesday that cuts spending by nearly $1 billion as the state struggles with revenues that are falling well short of projections. Details of a deal reached between Governor Dannel Malloy and fellow Democrats were sparse early on Wednesday afternoon as budget staffers rushed to prepare the documents ahead of a vote later in the day. The budget for fiscal year 2016-2017, which starts on July 1, will cut spending by $830 million, divert $100 million from transportation and other funds and sweep $30 million from various agency accounts, said Adam Joseph, a spokesman for Connecticut Senate Democrats. The spending plan is aimed at closing a $960 million hole in next year's finances that officials have blamed on falling capital gains tax receipts due to a volatile stock market. Malloy proposed an $18.14 billion general fund budget in February that cut discretionary spending but did not raise taxes. Since then the projected revenue shortfall for next year ballooned from $560 million to its current $960 million. The state's legislative session ends at midnight on Wednesday but the budget vote could keep legislators up until the small hours. Both chambers of Connecticut's General Assembly are dominated by Democrats. Connecticut, despite being one of the wealthiest states in the nation on a per capita income basis, has struggled to recover from the financial crisis and recession of 2007-2009. The state also faces a gap of around $260 million in the current fiscal year, despite a series of cuts. Malloy has said 2,000 state employees could be laid off in what he calls a "new economic reality." The governor has also frozen pay rises for managers in state government. (Reporting by Edward Krudy; Editing by Bill Rigby and Meredith Mazzilli)