State Comptroller Kevin Lembo said Thursday that the 2017 state budget is currently in line with projections, but there are some fiscal warning clouds still on the horizon.
At the moment income tax withholding is on pace to meet budget targets, but Lembo said more data is necessary.
“The biggest source of revenue volatility is in quarterly income tax filings,” Lembo said. “Those workers have earnings closely tied to Wall Street and in turn, their tax payments are subject to the ebb and flow of the stock market. We will have a more complete revenue picture once quarterly payments owed September 1 have been accounted for.”
In fiscal year 2016, several major revenue categories fell far short of budget targets.
“I will be carefully monitoring economic data that impacts state revenue and will adjust my estimates accordingly in future letters,” Lembo said.
Aside from revenue, the General Assembly told Gov. Dannel O. Malloy it has to find an additional $186.8 million in savings. Late last month, Office of Policy and Management Secretary Ben Barnes admitted that achieving those savings will be a challenge.
“While that target is not at a historically high level, it follows successive fiscal years of significant cost cutting with each year’s target becoming more challenging to achieve,” Lembo pointed out in his monthly letter to the governor.
As far as the economic recovery is concerned, Lembo noted that Connecticut continues to recover jobs lost in the Great Recession, but still lags behind the national average.
“We remain on a relatively slow path to recovery,” Lembo said.“The state is adding back jobs, but has yet to achieve the type of wage growth required to jumpstart the economy.”
However, it’s too soon to draw conclusions about this data, Lembo said.
“Increased growth throughout the economy and diligent monitoring of state expenses will be required to maintain a balanced budget moving forward,” Lembo added.
Senate Minority Leader Len Fasano, R-North Haven, was skeptical about Thursday’s report, which Lembo is mandated to compile and release based on data provided to his office.
“Connecticut is already facing a deficit, but the state Comptroller and Democrat legislative leaders won’t admit it until after the November elections,” Fasano said. “We’ve seen this movie before, and it ends in post-election tax hikes.”
Fasano said Connecticut will experience its first deficit in late November following the Office of Policy and Management’s monthly letter to Lembo.
The reduction in revenue collections at the end of 2016 will carry forward to the current year, according to Fasano. He said that means the state is likely already running a deficit in fiscal year 2017.
“Democrat leaders in Connecticut need to admit that we are facing a deficit now so that we can start to work together to close these shortfalls,” Fasano said. “The longer they wait to admit the truth, the worse the problem will become.”
But a spokesman for Malloy said it’s much too early to be drawing those conclusions.
“We’re in a new economic reality and we plan to take all necessary steps to balance the budget,” Malloy spokesman Chris McClure, said. “We have been, and will continue to be, proactive about limiting spending to what we take in – just like the households we represent.”