Connecticut’s budget is in the black due to surging sales tax receipts and federal grants tied to COVID relief as the state approaches a midterm election year.
That’s according to the latest revenue estimates , which show the state’s $20.7 billion budget jumped more than $500 million since April because of better than anticipated federal grants and sales tax revenue which topped $59.1 million.
It remains unclear how much of the federal grant funding will continue as the coronavirus pandemic eases.
“Let’s not be coy about this; the improvement we are seeing in revenue collections and expectations is undoubtedly good news for this state,” Office of Policy and Management Secretary Melissa McCaw said.
“The strong performance we are seeing in sales tax collections is indicative of the significant stimulus and financial support provided throughout the state and demonstrates our efforts to mitigate the spread of the coronavirus through effective protocols, giving consumers confidence they can shop safely in an open economy,” she added.
That was enough of an improvement that Gov. Ned Lamont said he was considering dusting off his campaign promise of restoring the property tax credit for low and middle income earners. He made the promise in 2018 but was unable to deliver.
Asked about renewing the pledge, “We’re taking a look at that right now,” Lamont said Wednesday at an unrelated event in Enfield.
Lamont is feeling good about Connecticut’s budget situation headed into an election year.
“First of all, it’s the first time I’ve been around that we’re probably going to have surplus three years in a row,” Lamont said. “I mean, that’s a big change from where we’ve been over the last 25, 30 years.”
Republicans pointed out that the problem is some of the increase in revenues is tied to inflation and is not a reliable revenue stream into the future.
“It is a worrying sign that increases in many of the leading revenue indicators can be attributed to the high rate of inflation, including the state tax on petroleum, and an overreliance on tax withholding on high income earners which suggests a lack of employment or stagnation in key economic sectors like restaurant and hospitality industries,” Rep. Holly Cheeseman, R-Niantic, said.
“Connecticut needs to maintain its fiscal discipline and not double down on detrimental tax policy that would hurt working class families or push high income earners out of state,” she added.
Lamont said he thinks the current revenue projections are strong.
“We have more taxpayers than ever before. I’ve always said ‘Not more taxes, more taxpayers.’ That’s working,” Lamont said.
However, Connecticut has not regained all the jobs it lost during the Great Recession and has regained just over 70% of the jobs lost during the March-April 2020 pandemic lockdown.
“Our state has experienced nine consecutive months of job growth and we continue to benefit from strong investment performance,” McCaw said.
But Main Street is still struggling.
”Employers are sounding the alarm loud and clear – the labor shortage is the number-one problem facing the state’s pandemic recovery and our long-term economic outlook,” Chris DiPentima, CBIA president and CEO, has said. “The challenge is this, how do we get people back into the workforce? The jobs are there and it’s clear that we need a more aggressive approach to resolve this issue.”
