Hugh McQuaid file photo

State Budget Director Ben Barnes projected that Connecticut will end the year $506.1 million in the black, an increase of almost $233 million over last month’s surplus.

“This significant change is primarily a result of the consensus revenue forecast reached between OPM [Office of Policy and Management] and the legislature’s Office of Fiscal Analysis on January 15,” Barnes wrote in his letter to state Comptroller Kevin Lembo.

Lembo will be asked whether he agrees with the number when he certifies the budget numbers on Feb. 3, two days before the opening of the legislative session.

Over the past two months the surplus has nearly doubled in size.

Most of the increase is related to the additional revenue the state received from its tax amnesty program. The state had budgeted revenue of $35 million for the program, but it received more than $175 million from delinquent taxpayers looking to settle their debts.

Barnes said tax revenues also were estimated upward by $219.4 million based on the consensus revenue estimates released last week.

“The largest positive revision is in the Personal Income Tax, up $213.1 million due to strong estimated payment collections and the expectation that this trend will continue through the 2014 filing season,” Barnes wrote.

At the end of 2012, the administration was convinced that because of changes in federal tax law the state’s tax collections would be artificially inflated. But estimated income tax payments made on a quarterly basis, mostly from self-employed small business owners, are still up.

“The strong performance of estimated payments to date suggests that the forecasted reduction will not occur, likely due to the extraordinary gains in the U.S. equity markets this past year, which were up by 29.6 percent as measured by the S&P 500 index,” Barnes wrote.

In addition, Barnes reported that spending is expected to be $80.6 million below what was budgeted. There also was a $44-million bump in spending, but Barnes said that will be offset by more than $129 million in lapses, which is money that’s been given to an agency but has not been spent.

Malloy, who has not said whether he will seek another term, touted the monthly report as good news.

“Today’s letter highlights the continued progress we have made in turning a record-setting $3.6 billion deficit to a surplus of more than $500 million, while at the same time making smart investments to improve our education system and grow jobs,” Malloy said in a statement.

“While the work isn’t done yet and we must continue working to improve the state of our state, thanks to the efforts of many people in our state, we’re seeing progress.”

However, there are still storm clouds looming on the horizon.

In mid-November, the legislature’s nonpartisan Office of Fiscal Analysis predicted that starting in fiscal year 2015 there will be a $1.1 billion deficit if the state continues spending at current levels. They also predicted deficits ranging from $1.1 billion to $1.4 billion in the three following fiscal years.

The predictions stand in contrast to the smaller deficits of $612.4 million in fiscal year 2016, followed by deficits of $432.5 million in 2017 and $376.3 million in 2018, projected by Barnes.

But no matter how it’s estimated, having a surplus of more than $500 million in an election year, followed by deficits makes Republican lawmakers wonder what Malloy plans to do with the money.

Sen. Minority Leader John McKinney, who is running for the Republican nomination for governor, has said that while the surplus figures are “positive news,” there are still deficits looming.

Malloy’s “use of one-time revenues, accounting gimmicks, and borrowing for operating expenses to balance the current budget leaves the state with few good options to close our future deficits,” McKinney said.

House Minority Leader Lawrence Cafero has said that the surplus is there because “we’ve borrowed money that we have to pay back.”

Cafero pointed out that in last year’s budget the state pushed the repayment of the 2009 Economic Recovery Notes into 2018.

Then there’s the one-time revenue increases like the tax amnesty program or “a handful of rich people happen to die,” and the state benefits from an increase in the estate tax, Cafero said.

“If we’re going to base our economy and our economic recovery on an occasional tax amnesty — one shot. Or praying to God, God-forbid a bunch of rich people die in any given year, then we’re going to fail,” Cafero said. “The worst thing we can do is come out big and bold with all these programs and then not be in the position to fund them.”

He also argued that Malloy changed the fiscal and budget assumptions to make it appear as if the state’s debt is decreasing when “we are borrowing more now than we ever have before.”

The projected state indebtedness including bonding is set to hit $20.8 billion on June 30 this year compared to the $19.97 billion that Malloy inherited when he took office.

However, Democrats like House Speaker Brendan Sharkey like to focus on other statistics.

“For the second straight year, thanks in large part to a continuing economic recovery and to our state employees for stepping up, we are on target for another balanced state budget,” Sharkey said Wednesday. “Investing in job creation and improving the business climate top our legislative agenda for 2014, but let us not forget we had a serious budget crisis just three years ago, and our state employees voluntarily opened their long-term contracts yielding significant savings for taxpayers.”

Under the 2011 re-negotiated state employee labor agreement, the state is expected to save about $11.6 billion from the restructuring of retiree health benefits. McKinney has pointed out that the state doesn’t have to start contributing to that fund until 2017, but the administration is still counting the savings.

“Without these labor concessions negotiated between the governor and labor leaders, we would still be facing a budget deficit instead of a surplus,” Sharkey said.