The state is projected to end fiscal year 2011 with a $57.2 million budget surplus according to State Comptroller Kevin Lembo. The estimated surplus exceeds last month’s projection by $56 million and is attributed to a $118.6 million increase mostly in the income and estate taxes.
In his first budget letter to Gov. Dannel P. Malloy, Lembo said while income tax growth is up, it’s still about $600 million below what it was just three years ago. With unemployment hovering around 9 percent, Lembo warned that with no signs of recovery on the horizon this month’s revenue increases won’t last.
“Connecticut continues to battle with historic and unshakable unemployment – our greatest obstacle to financial recovery,” Lembo said Tuesday. “Employment growth is key in diminishing state spending on social services, and propelling state revenue.”
But even Lembo doesn’t believe once Generally Accepted Accounting Principles are applied and the federal stimulus funds and borrowing are calculated that the state will actually have a $57.2 million surplus. A $3.67 billion budget deficit is estimated for next fiscal year.
The revenue gains Lembo projected are partially offset by increased spending of $62.6 million, which is related mostly to the low income adult Medicaid population. And there are about $1.3 billion in General Fund revenues from the federal government that are set to expire at the end of the year.
At an unrelated press conference Tuesday afternoon, Lt. Gov. Nancy Wyman, said the administration “doesn’t believe that to be a surplus.” The federal stimulus money and the $650 million the state is set to borrow don’t imply the state will have a surplus at the end of the fiscal year, she said.
Lembo’s projections are similar to the ones made by Malloy’s budget office last month, which also show a projected $57.2 million surplus for fiscal year 2011. Wyman said it’s the first time in a long time the two offices agree on the budget projections.
The state is still bracing for what is expected to be a more than $3.67 billion budget deficit next fiscal year. Those numbers are expected to increase once GAAP accounting is applied because the state’s debt will have to be taken into consideration.