Connecticut lawmakers on the two budget writing committees received good news Monday. For the first time in at least five years tax receipts are growing faster than fixed costs.
“Revenues are growing essentially faster than fixed costs,” Neil Ayers, director of the Office of Fiscal Analysis, told lawmakers Monday.
That’s a stark difference from 2014 when then Budget Secretary Ben Barnes announced Connecticut was in “a period of permanent fiscal crisis.”
Revenues, according to state budget officials, will grow about $400 million more than its debt each year of the biennium.
“This year we are basically reflecting positive structural balance,” Ayers said. “There are no reductions required in any of the fixed cost expenditures.”
There’s also the federal COVID relief funding that helped boost Connecticut’s bottom line.
Ayers told lawmakers that they had significant amounts of money they carried forward, along with federal ARPA dollars. Of the $547.6 million in carry forwards about 45% of those are one-time expenditures, while about 21% will be ongoing and 34% could potentially be ongoing.
As far as the $1.8 billion in ARPA money, about 39% was one-time expenditures, while about 45% could potentially be ongoing.
He warned lawmakers that recipients of those dollars may be coming to them in the upcoming session to continue that spending. The biggest recipient of those dollars was higher education units.
On the revenue side, “Generally, sales tax is a pretty vanilla revenue stream. It grows 2 to 3% most years,” Ayers said. “As you can see that has not been the case last year.”
Last year, sales taxes rose 10%, followed by an 11% increase. Next fiscal year is estimated at about 7.6%. That’s partially due to historically high inflation.
Over the past few years Connecticut has also been able to shave $7 billion off its long-term liabilities of around $85 billion in bonded debt and pensions. That number does not reflect the $3.2 billion the state will make to the state employees retirement system this year. However both the teacher and the state employees pension fund will remain a significant burden on the state until around 2030 and does not reflect the
OPM Secretary Jeffrey Beckham said the analysis of Connecticut’s budget “represents significant progress.”
“We’ve turned a corner, at least in terms of the fixed cost growth,” Beckham said.
But there are weaknesses in the reports given Monday. It only presents fixed costs vs. revenues, he said.
Rep. Toni Walker, D-New Haven, said the main take away from Monday’s report is that the state is going in the right direction with the fiscal restraint it’s shown over the last couple of years.
Walker said the concerns about higher education coming back to lawmakers for funding it received over the pandemic is one of the things they will have to take under consideration over the next couple of years because that’s how you build a workforce.
“This is probably one of the best fiscal presentations I think I’ve heard,” Sen. Craig Miner, R-Litchfield, who is retiring, said. “It is in no small way a result of the changes that I think, maybe it was Jeff Beckham alluded to, in 2017 and 2018.”
Miner was referring to the 2017 bipartisan budget that put in place the volatility cap, spending cap, revenue cap, and bonding cap.
He said he was glad to hear Gov. Ned Lamont say he would keep those guardrails in place.
“I’ll be rooting for him from the sidelines in the upcoming budget cycle,” Miner said.
