The latest year end surplus for fiscal year 2012 is $83.7 million, but state Comptroller Kevin Lembo isn‘t holding his breath.
“The good news is that Connecticut is currently headed for a fiscal year-end surplus – but the bad news is that there are several asterisks attached to that number,” Lembo said Tuesday. “The health and pension savings associated with the 2011 SEBAC agreement must still be assessed.”
Lembo concurs with Gov. Dannel P. Malloy’s budget office which is assessing a “significant shortfall” is possible in the employee health accounts. While robust enrollment in the Health Enhancement Program is a critical step for long-term savings and diminished costs from chronic care, the immediate impact must be monitored, he said.
“I am especially concerned that the aggressive allotment reduction applied to the retiree health account does not appear to be fully attainable,” Lembo said. “Additionally, we await actuarial findings related to estimated pension savings.”
The last actuarial analysis of the state’s employee pension funds was done in June 2010.
According to Cavanaugh’s actuarial report the plan holds just under $10 billion in assets, and about $19.2 billion in obligations, which is about 52 percent of its liability.
In total, OPM Secretary Ben Barnes told lawmakers in November that the state currently has $70 billion in unfunded liabilities, including everything from pensions to bonded debt. He said the state needs to start coming up with a plan to pay for it, but he didn’t offer any specific suggestions at that meeting.
Lembo said he is hopeful that any shortfalls in savings from the State Employees Bargaining Agent Coalition agreement can be offset by other statewide savings.
Turning to the revenue side, Lembo said revenues are expected to fall $11.6 million short of initial projections. And that’s after accounting for an increase in income tax refunds to reflect higher activity experienced through November because of the over withholding mistakes related to the retroactive income tax increase.
The Department of Revenue Services is still analyzing the refund information and will update Lembo and the governor’s budget office when it has more accurate figures.
“The most significant shortfalls are in the refund categories, which are anticipated to end the year with outlays $70 million in excess of the original budget estimates,“ Lembo wrote in his letter to Malloy. “Tax refunds and refunds of escheated property are the cause of the higher payments.”
The largest revenue gain so far has been the sales tax which has exceeded budget projected by $66 million. This year was the first time the state increased its sales tax in years from 6 percent to 6.35 percent.
And while a $83.7 million surplus may seem optimistic, all of the additional money is already earmarked for specific purposes. At least $75 million will be used to offset an anticipated increase associated with the transition to Generally Accepted Accounting Principles and the remaining balance is reserved to pay down debt associated with 2009 Economic Recovery Notes.
“Connecticut’s economy continues to show slow and erratic growth,” Lembo said citing recent statistics from the Department of Labor which show 159,200 residents are still unemployed even though unemployment dropped to 8.4 percent.
