After months of projected deficits and poor revenue figures, state Comptroller Kevin Lembo certified Monday that this year’s budget is running a $212.3 million surplus.
However, that’s about $8 million shy of the figure lawmakers need to help balance the two-year budget that the House passed Sunday and the Senate is expected to pass later today. In the 2014-15 budget lawmakers look to use $220.8 million to balance a $37.6 billion budget.
But lawmakers remain optimistic they’ll hit the target by the end of the fiscal year June 30th.
“Since last month, revenues are up $247.1 million,” Lembo wrote in his monthly letter to Gov. Dannel P. Malloy. “This is slightly offset by a projected $15.9 million increase in spending.”
Lembo cautioned that the surplus is good news for the current fiscal year, but is largely attributed to unreliable revenue sources that the state may be unable to count on in the following years.
“The surplus results from an improved revenue outlook and spending restraint,” Lembo said. “Deficit mitigation efforts, constraints on payroll growth, and fringe benefit budget reductions have contributed to the slower overall rate of spending growth.”
The increase in the capital gains tax rate in 2013 that resulted in the expiration of the Bush-era tax cuts is largely responsible for the increase in revenue.
According to Bureau of Economic Analysis data, net dividend distributions in the fourth quarter of 2012 were 23.2 percent higher than in the same period last year. Therefore, taxable gains have been realized in fiscal year 2013 that otherwise would have been paid in future fiscal years.
In addition, the stock market has experienced double-digit growth that may not continue into the next biennium, according to the bureau.
As Lembo cautioned last month, “These revenue gains are welcome, but have the potential to be one-time windfalls. The slow rate of the economic recovery continues to present budget challenges.”
In his letter to Malloy, Lembo pointed out that economic recovery is slow in Connecticut.
In March, the state added 2,600 non-farm payroll positions following a February loss of 5,700 jobs. To date, the state has regained 42.2 percent of the 120,000 jobs lost during the recession. Connecticut’s unemployment rate remains high at 8 percent.
State personal income is underperforming national growth. Connecticut’s personal income grew 2 percent in 2012 ranking the state 49th in the nation. Private sector weekly pay in the state was down 2.6 percent from March of last year.
Advance retail sales in March were up 2.8 percent over the same period last year, which is well below the growth experienced throughout most of 2012. New business starts in Connecticut have seen double-digit declines in each of the first three months of 2013 compared to the same periods in 2012.
On a positive note, Lembo said the housing market is rebounding.
“In March, Connecticut housing permits were up more than 50 percent over last year. Home sales and price data are also showing solid improvement,” he wrote.