HARTFORD, Conn. (CBSNewYork/AP) – When a Hartford-based investment management company surveyed the states for credit worthiness, Connecticut came in dead last.

WCBS 880 Connecticut Bureau Chief Fran Schneidau On The Story

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The Nutmeg State went from 37th to 50th, according to the Conning survey, which deemed the state among the worst in job creation and revenue growth while saddled with high debt.

Joe McGee, vice president of public policy at the Business Council of Fairfield County, said there is no way to sugarcoat things, admitting that the state is coming out of the recession slower than the rest of the country.

“What’s going to have to happen here in the short run is the governor, and he’s already said this, is going to have to cut spending. He cannot raise taxes again,” McGee told WCBS 880 Connecticut Bureau Chief Fran Schneidau.

“Connecticut has maxed out its credit card. It really cannot continue to bond a huge amount of debt,” he added.

For McGee, the biggest concern is the soaring cost of health care.

He noted that that is a red flag flying not only in Connecticut he notes, but in all 50 states.

Gov. Dan Malloy‘s budget director confirmed Wednesday the state’s budget deficit has grown to about $365 million, requiring the governor to submit a deficit-cutting plan to the General Assembly.

In testimony before the legislature’s Appropriations Committee, Ben Barnes said the new figure includes declines in expected state revenues and increased spending for Medicaid services. Barnes said the Office of Policy and Management has already begun work on a deficit-cutting plan for Malloy’s consideration.

“While I’m not prepared today to address any elements that might or might not be included in that plan, you can expect that we will announce specifics as soon as possible,” he said. Malloy has said he would not support raising taxes to cover the budget gap.

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Meanwhile, Barnes said his office will release updated budget projections on Nov. 20.

Republican legislative leaders have accused the Democratic administration of trying to downplay the extent of the state’s deficit. On Monday, Malloy told the Hartford Courant that it was “a little premature” to be discussing a deficit. The fiscal year ends on June 30.

Malloy said the state could receive a revenue influx if wealthy state residents sell off stocks and report capital gains before any federal income tax increases kick in on Jan. 1. There is a debate in Washington over whether to extend tax cuts from President George W. Bush’s era for wealthier taxpayers.

Barnes said Wednesday that it’s possible the state may receive additional revenue. At the end of 2010, when there was also uncertainty about the tax rates, Connecticut residents reported a very large amount of capital gains and dividend income that led to a budget surplus, he said.

“We’ve not counted on that revenue, although I’m hopeful that when we revisit it in January, we will see evidence that that phenomenon has occurred and be able to forecast that revenue. For now, it is a possibility,” he said.

The GOP was upset last week when Barnes announced that the latest estimates from the legislative and executive branch budget offices showed that Connecticut’s tax revenues had fallen by $52.7 million since April, when the last revenue estimates were released.

House Minority Leader Larry Cafero Jr., R-Norwalk, accused the administration of trying to “put lipstick on a pig” and said it should have revealed the total deficit figure. Cafero contends the state is in “very difficult fiscal shape.”

Barnes has said the slumping revenue figures are “not surprising given the continued sluggishness of the national economic recovery.”

During Wednesday’s hearing, Barnes said the General Fund, the state’s largest account, is currently short by about $260 million. He attributed it to growth in the Medicaid program, explaining how caseloads have increased, in addition to spending on hospital and nursing home care.

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