Under water for most of the 2017 fiscal year so far, Connecticut’s budget situation has improved and is running a $23.3 million surplus, according to the governor’s budget office.
Driving the change was the $56.7 million improvement in revenue projections announced Jan. 17.
The corporation tax was revised up $80 million as a result of strong collections over the past few months, and the legal settlement with a Wall Street credit rating agency brought in an unexpected $31.5 million earlier this month. Sales and use taxes were revised downward by $30.4 million and continue to underperform their monthly targets, while the withholding component of the personal income tax was also revised downward by $15 million, according to the latest consensus revenue report.
“As we have noted in the past, the month of April, when final income tax payments are received, is the most significant revenue collection period for the state and will prove decisive in determining year-end balance,” Office of Policy and Management Secretary Ben Barnes warned in his monthly letter to state Comptroller Kevin Lembo.
Lembo is expected to certify the numbers on Feb. 1, a week before Gov. Dannel P. Malloy will unveil his two-year budget proposal.
None of what was reported by Barnes to Lembo last week speaks to the looming $1.46 billion budget deficit expected for 2018.
“While I’m thankful that projections from the governor’s office are not currently showing a deficit for this fiscal year, we have to recognize that the reason for this change is not that our economy is growing,” Senate Republican President Len Fasano, R-North Haven, said. “This is a result of $172 million in one-time revenue. This should underscore the fact that we have to be exceptionally cautious when it comes to creating a sustainable budget as we prepare to tackle even greater challenges in the next fiscal year.”
The $172 million in one-time revenue Fasano includes the $31.5 million from Moody’s Investor Services and the $120 million Connecticut received in October 2016 from RBS Securities. Both settlements were related to the handling of mortgage-backed securities which directly contributed to the 2008 financial crisis.
Democratic lawmakers were equally as cautious in expressing optimism over the surplus for 2017.
“It is a good sign that the budget continues to stabilize, and our main focus can turn to the 2018-19 budget years,” House Speaker Joe Aresimowicz, D-Berlin, said. “As we monitor both revenues and expenditures over the coming months, we must still remain diligent on ensuring that the budget reflects the priorities of the people of Connecticut.”
And while revenues have improved, spending — according to Barnes — is still $10.2 million above what was adopted.
“We have worked hard with the governor and the state’s agencies to hold down expenditures, and this report shows we are making progress,” Rep. Toni E. Walker, D-New Haven, said. “We must continue, however, to look for more efficiencies in government while protecting the people of Connecticut who depend on vital services.”
In order to solve a $1.46 billion budget deficit without raising taxes or fees, Malloy and lawmakers will have to work hard at finding efficiencies when few exist after the adoption of the 2017 budget. The current budget cuts about $850 million in spending and led to more than 1,600 state employee layoffs.
Malloy is expected to announce his plans on Feb. 8. Lawmakers will then have until the first week of May to make changes to what the governor will propose.