HARTFORD, CT — Governor-elect Ned Lamont and the incoming General Assembly still have a two-year, $3.8 billion budget deficit to worry about in the future, but this year’s budget is still on track to end up about $245.7 million in the black, according to state Comptroller Kevin Lembo.
Lembo said the most significant revenue changes included an increase in the withholding portion of the personal income tax of approximately $90.8 million, and an increase in casino gaming payments of $20 million based on better-than-expected results in light of new interstate competition.
“The withholding portion of the income tax continues to perform well year-to-date, in line with job gains in recent months,” Lembo said. “The stock market, after a tumultuous October, continued to experience volatility through November. Estimated and final income tax payments are, so far, still ahead of last year’s pace and collections are exceeding Fiscal Year 2019 budget targets. My office will be monitoring receipts closely through December and January, the next critical time period for those quarterly payments.”
The difference in the size of the surplus is related to Lembo’s higher projections of the legal settlements the state will make.
The longest time between recessions, historically, is about 10 years. It’s been nine years since the last recession and Connecticut has yet to recover all of the jobs it lost in 2008.
“In a recent survey of economists by Reuters, the respondents’ median probability of recession over the next two years edged up to 35 percent from 30 percent, as the economy begins facing stronger headwinds on a number of fronts,” Lembo wrote. “While predicting the timing of recessions can be notoriously difficult, the lesson for Connecticut policy makers should be clear. State government should maintain spending discipline and continue building the balance in the Budget Reserve Fund (BRF) to protect against the inevitable downturn whenever it comes. For this reason, my office has traditionally recommended the BRF reach a level of 15 percent of General Fund spending.”
Connecticut might be slightly more prepared than it was last time if the Rainy Day Fund balloons to $2.1 billion, which is about 10.9 percent of general fund spending.
Connecticut’s overall budget results are ultimately dependent upon the performance of the national and state economies, Lembo said.