It’s not by much, but the $506.1 million surplus has already dropped to $504.4 million, according to Gov. Dannel P. Malloy’s budget office.
In his latest letter to state Comptroller Kevin Lembo, Malloy’s Budget Director Ben Barnes, said the governor still plans on giving refunds to taxpayers, adding more to the Rainy Day Fund, and making an additional payment to the state pension fund. However, the contribution to the Rainy Day Fund will be reduced to $249.4 million, instead of the $250 million the governor had initially earmarked in his budget adjustments.
The $600,000 reduction in the Rainy Day Fund isn’t significant by itself. In an email, Barnes said $600,000 “is below our level of precision in these estimates.”
However, it may hint at what direction the Malloy administration will head if the surplus continues to shrink.
Asked on Jan. 30 what he would do if the surplus began to dwindle Malloy artfully dodged the question.
“I think they represent an appropriate percentage, but I want to draw one line, one line. And that is if the surplus grows I think that money should go exclusively—that additional money—to the Rainy Day Fund and to pay down our pension obligations,” Malloy said at Derby City Hall on Jan. 30.
A contribution of $249.4 million would still put the Rainy Day Fund balance at $550.1 million, according to Barnes’ letter to Lembo.
The $1.7 million drop in surplus funds between Jan. 20 and Feb. 20 is not attributed to a decline in revenues, but a change in spending related to some of the budget adjustments the governor made in his 2015 budget proposal.
The spending on those new programs didn’t come into focus until after the Jan. 20 report, according to Barnes.
The report predicts that $44.7 million of the $94.7 million in spending the Malloy administration planned to hold back from the legislative and executive branch agencies has been achieved. The $7.4 million in spending it asked the Judicial branch not to spend “will not be achieved.”
The February monthly forecast uses the Jan. 15 consensus revenue projections. The state revenue projections come into sharper focus after the April 15 income tax deadline.
“As is typical, more than fifty percent of income tax collections are received after January 31st and the current forecast anticipates healthy collections during the April filing season,” Barnes wrote.
Lembo will certify the budget projections on March 3.
Nonpartisan budget analysts predicted in November that if the state continues to spend at the current level and accounts for inflation then the budget deficit in 2016 and the next three fiscal years after that could range between $1.1 billion and $1.4 billion per year.
Malloy’s administration continues to argue that if revenues continue to rise and spending stays at 2.8 percent then there won’t be a deficit in 2016. Malloy’s Feb. 5 budget document goes as far to argue that “if we maintain Governor Malloy’s current spending trends, we will produce a surplus of over $400 million by 2018, when considering the proposed new tax cuts.”
Barnes characterized the latest report as “saying that our surplus projection is stable with several offsetting adjustments.”