State revenues are still in the black, but they are expected to decrease by about $430 million over the next two fiscal years, according to fiscal analysts. However, state officials, who have weathered years of budget deficits, were not ready to hit the panic button Monday.
The latest consensus revenue forecast from Gov. Ned Lamont’s budget team and the legislature’s Office of Fiscal Analysis found the state is still expected to end the year with a more than $600 million surplus. That’s still shy of the $1.1 billion they estimated when they passed the budget in June, but it’s not enough to spur pessimism.
“While we are seeing some softening in our revenue projections, our overall state fiscal position remains positive,” Office of Policy and Management Secretary Jeffrey Beckham said. “However, as we work on budget adjustments for fiscal year 2025, we must be mindful of the need to adhere to the constitutional spending cap.”
Gov. Ned Lamont was not around to pass the budget guardrails, but he’s been a staunch supporter of keeping them in place.
“We remain in a position in which we are able to continue paying down legacy debt built up over the decades by previous administrations, and in just two months the largest income tax cut in state history will go into effect. This forecast demonstrates the importance of the revenue and volatility caps in giving the state a buffer from potential economic downturns,” Lamont said.
Beckham said the Lamont administration wants to avoid any gimmicks that circumvent the spending cap and other fiscal guardrails.
Republican lawmakers agreed.
“Even with some negativity in the consensus revenue, it is clear that the spending caps and fiscal guardrails that Connecticut Republicans pushed for have brought stability and predictability to our state finances after years of ‘permanent fiscal crisis.’,” Senate Republican Leader Kevin Kelly said. “We must not deviate from those guardrails. Simply put: the guardrails are working.”
State Comptroller Sean Scanlon said “While fluctuations in revenue projections are anticipated throughout the fiscal year, Connecticut continues to be in a strong fiscal position. Through careful planning and smart budgeting, we’ve built up our Rainy Day Fund to account for revenue volatility while also paying down historic amounts of pension debt. Today’s consensus revenue forecast is an important reminder that our fiscal guardrails are working as intended and illustrates why we must continue them.”
Nevertheless, progressive organizations like Recovery for All CT are urging state officials to consider the growing needs statewide. They argue that a disproportionate share of the windfall has been allocated to paying down pension debt, leaving health care, social services, education, and other essential programs underfunded, especially during the pandemic’s worst years.