Connecticut is still expected to end the year with a budget surplus even after it increased general fund spending by $45 million following a special session last month when it extended the gas tax holiday and free bus fare.
With a $1 billion surplus, which increased slightly by $12.7 million last month, Connecticut is still in good shape. The projected surplus represents about 4.6% of the general fund.
“The operating surplus is comprised of $571.0 million in increased revenue and $148.0 million in net expenditures below the amounts included in the enacted budget plan,” Office of Policy and Management Director Jeffrey Beckham wrote in his monthly letter to Comptroller Natalie Braswell.
He added that Connecticut’s economy remains strong based on stable tax revenue and a strong job market.
“Thanks to conservative revenue estimates in the enacted budget we have been able to provide budget stability during the current fiscal year,” Beckham said. “However, as we develop the budget for the next biennium, we must recognize the potential softening of the global economy could impact the state’s finances and our ability to achieve and maintain a balanced budget.”
The first budget forecast since the special session last month doesn’t take into account any additional federal funds that may be on the way to the state.
The state, according to the monthly forecast, will transfer nearly $4 billion to the state employee and teacher retirement funds.
Recently, Connecticut Voices for Children, advocated against transferring any additional dollars above what is required to the pension funds. They say it increases income inequality in the state and could be used elsewhere.
The additional nearly $5.8 billion in pension payments over the last few years has received praise from both Democrats and Republicans, but Connecticut Voices for Children’s research and policy director Patrick O’Brien said it has “the substantial cost of increasing the unfairness of the budget.”
He concluded that if Connecticut stopped making those additional payments it would see between $490 and $735 million a year in available revenue. He added that it could generate an average of an additional $1.5 billion in revenue if it further reformed the volatility and revenue cap.
Connecticut lawmakers also received some good news earlier this month about the budget, which it has struggled to keep out of deficit for years. 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 Dec. 6.
So far there’s nothing in the budget forecast that changes those projections.