Unless current trends reverse themselves, state officials could find themselves in the awkward position soon of making emergency program cuts to keep Connecticut’s budget in balance — while simultaneously ignoring a whopping $1.2 billion projected windfall of income and business tax receipts. Gov. Ned Lamont’s administration recently reported nearly $400 million in projected cost overruns in the General Fund, which covers about 90% of the entire, $26 billion state budget. Most of that problem involves Medicaid and retirement benefit costs, though mental health and correction programs also face tens of millions in added expenses. The budget, which began July 1, would be in deficit already were revenues not running above projections and if state law didn’t mandate a built-in, $300 million surplus to guard against problems. That safety net now is down to $71 million, or one-third of 1% of the General Fund, with eight months still to go in the fiscal year. “We are considering our administrative options to stay on budget and under the [spending] cap,” Chris Collibee, spokesman for the governor’s budget office, said Wednesday when asked whether the administration would need emergency cuts. “We are not going to discuss specific actions we are considering at this time.” Existing law gives the state’s chief executive broad discretion to reduce most accounts unilaterally by up to 5% whenever “the governor determines that due to a change in circumstances since the budget was adopted certain reductions should be made.” Historically, governors’ emergency cuts have hit social service programs and higher education worse than most other segments of the budget. Municipal aid cannot be reduced without legislative approval. Other big pots of cash — wages, fringe benefits and debt payments — are largely untouchable because of contractual obligations. And it makes no sense to cut Medicaid, a federal entitlement program that must serve every poor patient who qualifies financially. Even if the state were to cut the program, it would have to spend more if the caseload necessitated it. Lamont, who has enjoyed robust surpluses in every full fiscal year he has administered since taking office in January 2019, hasn’t had to employ the emergency cuts maneuver, commonly referred to as spending “rescissions.” But his predecessor, Dannel P. Malloy ordered emergency cuts several times during his tenure — the last in December 2017 — as Connecticut frequently struggled with deficits throughout the 2010s. But Malloy never had to impose rescissions while sitting on huge piles of cash. In late 2017, legislators enacted a package of budget controls designed to control spending, build reserves and pay down pension debt. And one of those controls has forced the state to save a huge portion, about $1.4 billion annually through the first seven years, from its income and business tax receipts. This program is slated to capture $1.2 billion this fiscal year. And those funds can’t be re-purposed to close any deficit while the fiscal year is still underway — absent a special declaration from the governor and a 60% vote of approval from the legislature. So, if the $71 million surplus Lamont is projecting turns into a deficit in the coming months, would the governor cut tens of millions from core programs with $1.2 billion sitting off to the side, unused? Critics say budget controls already are saving too much, at the expense of education, health care, social services and other core programs. Since 2017, more than $12 billion in surpluses has been used to build reserves or pay unfunded pension obligations. And leaders of the General Assembly’s Appropriations Committee said Wednesday that emergency cuts wouldn’t be the right move. If the budget slips into deficit, officials could ignore the shortfall until the fiscal year closes on June 30. At that point there’s nothing blocking them legally from diverting part of the $1.2 billion earmarked to pay down pension debt and instead use it to cover any deficit. Sen. Cathy Osten, D-Sprague, and Rep. Toni Walker, D-New Haven, along with other Democratic legislative leaders, say the current situation is driven by an aggressive savings program that isn’t sustainable at its current pace. The system might have collapsed earlier, ironically, had it not been for the coronavirus outbreak in 2020, Osten noted. Congress responded one year later with the American Rescue Plan Act, or ARPA, which sent nearly $3 billion in temporary aid to Connecticut. That aid gave state officials tremendous budget flexibility. It was exempt from normal spending controls and could be used to shore up almost any program legislators or Lamont desired. So, while the state was saving its tax dollars and other traditional resources in record amounts, ARPA was picking up the slack funding core programs. But those pandemic dollars have all been expended and Osten and Walker are anticipating big financial demands in February when Lamont proposes a new budget for the next two fiscal years. New wage agreements are being negotiated in the coming months for nearly all unionized employees. Higher education units and nonprofit social service agencies, groups that received big ARPA funding in recent years, will ask legislators to replace those vanishing dollars with more traditional state funding. And workers in nursing homes and group homes for people with disabilities are expected to seek wage hikes, which will place more pressure on a Medicaid program that largely supports these services. “I think that everybody has said, in one shape or another, that we need to have a discussion about” the budget controls, Walker said. “If it’s not going to strangle us now, it’s going to strangle us next year.” Osten added no one wants to abandon savings efforts entirely and said legislators know tough spending choices need to be made.  “I want to get back to real common-sense budgeting without the thought that we had additional [pandemic] dollars available to us,” she said. But Republican leaders say emergency budget cuts wouldn’t even be a possibility had majority Democrats made tough spending choices last May, just before the regular 2024 General Assembly session ended. That’s when Democratic leaders opted to adjourn without formally adjusting the $26 billion budget they and Lamont had approved for this fiscal year. Lamont had warned his fellow Democrats last February, months before the 2024-25 fiscal year had begun, that this budget lacked adequate funding for retirement benefits and Medicaid — the two biggest problem areas currently. But there was no room to add more funding because of a spending cap that keeps budget growth in line with household income and inflation. Democratic legislators could have added to Medicaid and retirement programs provided they made offsetting cuts elsewhere, but chose not to, said Senate Minority Leader Stephen Harding, R-Brookfield, and his House counterpart, Vincent J. Candelora, R-North Branford. “By us not addressing those issues, we’ve left it to the governor’s office to make those decisions,” Harding said. “It’s an abdication of our duty.” “This flies in the face of good budget practices and good transparent government,” Candelora added. “We really have a runaway budget.”