CTNJ file photo

Earlier this month, State Comptroller Kevin Lembo predicted the state would end the year with a $33.2 million surplus. But thanks to additional federal money, Democratic Gov. Dannel P. Malloy has revised revenues upward by $63 million over last month’s forecast.

That brings the new estimated 2014 surplus to $121.3 million, according to Malloy’s budget office.

In its monthly letter to Lembo, Ben Barnes, Malloy’s budget director, said most of the additional revenue came from a $42.1 million increase in federal Medicaid awards. About $37.2 million came from personal income tax revenue, while all other revenue was revised downward by $16.3 million.

If the surplus number holds into September — when the state closes the books — then the $121.3 million will be deposited in the Rainy Day Fund, bringing the balance in that fund up to $392 million.

“While there is still much work to do, we are making progress in our effort to make state government more sustainable for the long term,” Malloy said in a press release. “Depositing this surplus into the Rainy Day Fund, combined with our efforts to limit spending, are just a few of the ways that we are taking responsible steps to restore the fiscal health of our state.”

But Republican lawmakers were quick to criticize the decisions the state made in order to accomplish what they believe is a fake surplus.

“This is a paper surplus, the only place it should be deposited is the trash can,” Sen. John McKinney, who is running for governor, said. “We need an honest budget with a real plan for tax relief, not more gimmicks.”

Sen. Len Fasano, R-North Haven, said the surplus reported Tuesday by the Malloy administration comes at the cost of “shifting expenses off the books, borrowing to fund everyday government expenses, and diverting over $189 million away from the Special Transportation Fund.”

“It is not a true surplus,” Fasano said.

What Malloy is touting as a surplus is “celebrating — a failed economic plan coupled with the creation of an illusion of excess funds,” said Fasano.

“The truth is Connecticut faces a deficit of almost $3 billion over the next two years,” Fasano said. “Bonding and moving funds around only digs us into a deeper hole, grows our debt and underfunds areas that need our support.”

Fasano and McKinney are referring to several decisions made over the past few years to refinance debt and push the repayment date past the November election. The legislature and Malloy also erased the 2012 budget deficit by postponing the early payment of about $222 million in debt.

“While we aren’t yet where we want to be, this shows that Connecticut’s on the right path,” Barnes said in a press release. “Prudent fiscal policy under Governor Malloy — with average annual budget growth lower than those of his last two predecessors — means we are building reserves that are an important contingency against any future economic downturn.”

Earlier this year, Malloy and his budget office wanted to give what they predicted would be a $500 million surplus back to the taxpayers through a $55 tax refund. However, plans for that were scrapped in late April when budget analysts predicted the surplus would be much smaller.