State lawmakers will have about $200 million more to spend next year thanks to new revenue projections from state officials.
The state budget surplus increased $163 million Monday and the new projected operating surplus is $1.58 billion.
Solid tax collections in several areas such as sales and corporate profits boosted the state’s bottom line and gave lawmakers more wiggle room as they negotiate a two-year budget with Gov. Ned Lamont over the next five weeks.
“This consensus revenue forecast is good news for the state’s general fund, shows the importance of adhering to the fiscal guardrails that are protecting our state budget from wild swings of the stock market, and is yet another reminder that Connecticut cannot responsibly commit one-time revenues to ongoing expenses but should instead deposit surplus revenue into our rainy day and pension funds while the sun shines,” Lamont said.
He credited the bipartisan fiscal guardrails put in place in 2017 for the boost.
However, he warned against seeing this boost as a reason to spend more or look to maneuver around the spending cap.
“It’s also good news that although revenues subject to the volatility cap are down $500 million this fiscal year and more than $930 million over the next biennium, that loss does not impact our general fund balance and we still anticipate sizable deposits to our pension funds that will provide budget relief in future years and help us afford a broad-based, middle-class tax cut,” Lamont said.
Republican lawmakers saw the new estimates as a reason to offer more tax relief.
“This forecast presents us with a tremendous opportunity. We must provide permanent and significant tax relief for struggling working and middle-class families who have been taking it on the chin due to inflation,” Republican Senate Leader Kevin Kelly said. “ Republicans are looking out for them. The sacrifices they are making must be respected.”
Kelly added: “Those smart fiscal guardrails have led us to the cusp of the first state income tax cut in three decades: They ain’t broke, and they don’t need fixing. Taxpayers deserve a state budget with the maximum amount of tax relief which respects the fiscal pledges we have all made as state lawmakers.”
Some Democratic lawmakers have looked to usurp some of the spending cap constraints in order to spend more money on nonprofits and schools.
Last week the Finance, Revenue and Bonding Committee looked to move roughly $400 million out from under the state spending cap.
Lamont proposed a $50.5 billion budget back in February and the Appropriations Committee moved a roughly $51 billion spending plan paid for with a revenue package last week.
Senate President Martin Looney has defended the accounting maneuvers employed by the finance plan as tools to direct some of the state’s resources, including an expected $3 billion budget surplus, toward necessities that had been underfunded for more than a decade.
At least some of the inflation-driven increases in sales tax revenue should be available to support a variety of inadequately funded service providers, he said. Meanwhile, the municipal aid the governor described should be removed from under the spending cap, as it had been prior to bipartisan changes made in 2017, Looney said.
“Historically, that funding had been outside the cap and I think we can make a strong case that it should be again because there are extraordinary needs in the poorest municipalities in the state, especially in the wake of the pandemic,” Looney said.
On Monday Looney said he numbers confirm the economy remains strong and “This additional revenue, along with other funding sources, should be used to support a number of critical areas of the state budget. The time to invest is now.”
Democratic legislative leaders released a joint statement last week, calling for additional investments in a variety of areas.
“As we move forward, we will be looking at finding ways to bolster funding in a number of critical areas – including nonprofits, public schools, higher education, healthcare and childcare workers, paraprofessionals and group homes – while still protecting the fiscal health of the state and providing residents with historic tax relief,” Looney and House Speaker Matt Ritter said.
Lamont suggested he may be open to providing additional funding for nonprofits if the coming revenue estimates provided the state with additional fiscal latitude.
“If we have a little bit of flexibility, that’d be a priority for me to do a little more help for not-for-profits,” he said.
Negotiations on the budget will now begin in earnest behind closed doors.
Republicans plan to unveil their own budget proposal Tuesday.