State Comptroller Kevin Lembo said Monday that the state is on track to end the 2017 fiscal year essentially balance. However, he warned that economic growth remains moderate and capital markets remain volatile.
There’s also the recent past as a guide. The state ended the last two fiscal years in deficit.
Republican lawmakers were critical Friday of the state’s inability to end the 2016 budget in balance. According to Lembo, the state ended the 2016 fiscal year on Sept. 30 with a $170 million budget deficit that will be covered by the Rainy Day Fund.
“The state’s precarious fiscal health leaves us no room for error,” House Minority Leader Themis Klarides said. “Connecticut finished the 2016 fiscal year $170 million in deficit that had to be covered by the Rainy Day Fund, which is now significantly depleted.”
There is $235.5 million in the Rainy Day Fund, which is about 1.3 percent of general fund spending.
Senate Minority Leader Len Fasano, R-North Haven, predicted the state will face similar problems this year.
“With a depleted rainy day fund and no sign that legislative leaders are willing to do anything before the election, we have very little protection for the serious financial problems contained in this year’s budget,” Fasano said. “The rerun of this movie continues, and this state will suffer another huge deficit simply because of their inaction.”
In 2016 the state spent $17.92 billion, which is an increase of $501.6 million or 2.9 percent over the 2015 fiscal year. Almost 80 percent of the spending increase went toward debt service which increased $265.5 million, or 18.7 percent, and the state employees’ retirement system, which grew $125.9 million, or 13 percent.
General government spending was down $34 million, health and hospitals was down $19.4 million and conservation and development was down $11 million.
“The largest program area increase was to education, which grew by $96.6 million or 1.9 percent. Education is the largest single program area accounting for almost 30 percent of General Fund expenditures,” Lembo wrote in his Sept. 30 letter to Gov. Dannel P. Malloy.
Most of the 2016 budget woes can be attributed to “disappointing revenue results,” Lembo said.
Those results were “largely produced by an economy that has yet to reach past recovery growth levels, as well as considerable stock market volatility,” Lembo added.
Connecticut added 15,800 payroll jobs in 2016 and has recovered approximately 80 percent of the jobs lost in the 2008 recession.
Lembo said personal income was expanding in Connecticut at an annualized rate of just over 3 percent in 2016, which is less than half the rate of income growth that was experienced after the 2001 recession.
“The year that ended on June 30, 2016, was an extraordinarily difficult one,” Chris McClure, a spokesman for Malloy, said. “Income tax receipts were $650 million below budget, and the state was repeatedly compelled to take difficult steps to mitigate a developing deficit.”
He said they will continue to hold the line on spending in 2017 in order to end the year in balance.
When it adjusted the 2017 budget in May, legislators set aggressive savings targets for the Malloy administration to meet. The administration is expected to save $190.8 million.
“While that savings 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 said Monday. “Current General Fund projections have Fiscal Year 2017 total spending growth flat against last fiscal year. To realize no growth in actual year-over-year outlays is a considerable management challenge that will require the skillful efforts of all agencies and branches of government.”