Connecticut’s fiscal picture looks similar to what it did last month with the state projected to end fiscal year 2011 with an estimated $57.2 million surplus, according to state Comptroller Kevin Lembo.
In his monthly letter to Gov. Dannel P. Malloy, Lembo said the $57.2 million surplus is a the result of substantial one-time windfalls from the federal government and $646.6 million in Economic Recovery Revenue Bonds the state decided to borrow in order to cover last year’s budget deficit.
The state Treasurer’s office said Tuesday it has not gone out to market yet for the sale of the Economic Recovery Revenue Bonds and that planning will begin in earnest after May 1. The sale of the bonds, which will be paid back by a portion of consumers’ electric bills, is being challenged in Supreme Court by Sen. Joseph Markley, R-Southington. A court date has been scheduled for March 23.
Lembo said Connecticut would have faced a $2 billion deficit at the end of fiscal year 2011 if the state had relied on normal annual recurring revenue sources.
“This general fund surplus is only a mirage – made possible by one-time windfalls, borrowing and other non-recurring revenues,” Lembo said in a press release Tuesday. “These one-time tourniquets must be replaced by readily available state efficiencies – starting with my call for significant savings of more than $66.5 million year to year by consolidating state prescription purchasing.”
In Lembo’s letter to Malloy, he also noted that the state received greater revenues than anticipated this year in the income tax, sales tax and inheritance tax. The income tax, in particular, has outperformed last year’s revenues by 19 percent. It has brought in $211 million more than anticipated.
The real estate conveyance tax and federal grants are the most significant underperforming revenue.
Despite significant income tax gains this year, caseloads at Department of Social Services’ programs are mounting due to residents losing jobs and income. As a result, DSS has overspent its budget by $221 million. The total budget deficiencies amount to $315.7 million.
But Lembo said the economy is improving slightly.
“Based on preliminary estimates, Connecticut added 5,300 payroll jobs in calendar year 2010,” Lembo wrote in his letter. “The state’s unemployment rate remains historically high at 9 percent, which is unchanged from the rate experienced at the start of 2010. Nationally, advance retail sales for January were up a solid 7.8 percent following a 7.9 percent gain in December. Double-digit sales increases were experienced in motor vehicles, and non-store retail items. Equity markets have trended positive from the lows of July. Since hitting cyclical lows in the fourth quarter of 2008, corporate profits have been growing at some of the fastest rates in history over the last seven quarters.”