"So, we need to solve this problem through reduced spending," Barnes said.

An upbeat Malloy told his state agency heads that the state is better positioned to deal with the budget challenges than they were two years ago.

"Our state government, particularly the executive branch, is smaller, leaner and more cost-effective than it has ever been or been in at least recent times," he said. "We're going to continue that process, deliver a high level of service to our citizens and we're going to do it successfully."

House Minority Leader Lawrence Cafero Jr., R-Norwalk, accused Malloy of trying to sugarcoat the state's budget situation.

"I don't know how you look at a $365 million deficit when you, what, less than three months into a fiscal year; I don't know how you look at a $2.2 billion deficit for the next two years ... and say with a straight face that we're in a better position now than we were two years ago, especially knowing that you increased taxes by $1.8 billion," he said.

Cafero and other Republicans contend that Malloy and the Democratic-controlled legislature that passed the original budget failed to cut spending and relied on "phantom cuts" and savings to balance the books.

Malloy on Thursday insinuated that Cafero's criticisms were motivated by a possible interest in running for governor in 2014. Cafero said he hasn't announced any intentions to run for governor and said his commentary about facts provided by the administration is legitimate.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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