Connecticut’s fiscal surplus for the current fiscal year soared $ 400 million to nearly $ 900 million last month as the state continues to benefit from a strong stock market and government aid to coronavirus.
The Office of Policy and Management’s most recent financial report now projects a surplus of $ 894.7 million for fiscal year 2022, well above the originally projected surplus of $ 274.9 million.
The latest projected surplus includes $ 802.7 million in increased revenue and $ 92 million in net expenses, which is below the budget approved by lawmakers earlier this year.
Connecticut’s Rainy Day Fund is also set to hit nearly $ 5 billion by June 30, and the balance of the once-troubled Special Transportation Fund is set to hit more than $ 251 million in surplus.
The state’s reserve fund was zero in 2011 and is now one of the strongest in the country, with a current balance of $ 3.1 billion – the legal maximum.
The law requires excess funds to be used to meet uncovered liabilities in the state employee pension system and the teacher pension system.
calls for tax breaks
The bipartisan financial reforms passed in 2017 created the platform for turnaround in finance, with a surge in positive news over the past year.
Connecticut’s bond rating was upgraded by four major credit rating agencies in May, with the state advancing 11 places to 24th in the latest CNBC study, America’s Top States for Business.
Chris DiPentima, President and CEO of CBIA, sees the excess as an opportunity to “do much more than hold the tax ceiling and pay off long-term debt,” and believes the funds could be used to avoid future deficits.
“We have a tremendous opportunity ahead of us to grow the Connecticut economy,” said DiPentima.
“With a comprehensive tax break policy that reaches both businesses and individuals, we can make Connecticut a business hub and at the same time attract jobs to keep those workers busy.”
The latest budget report also called for a stronger focus on staff development in order to address the state’s labor shortage.
“As Connecticut continues to expand and grow, particularly in STEM-related sectors, our tax policies should reflect the value we place on these high-paying jobs,” said Ashley Zane, CBIA government affairs officer.
“This means not only restoring or expanding tax programs like the R&D tax credit and training credit, but also creating an environment for employees to thrive on a personal level by not increasing broad-based taxes.”
The report also cautions the state’s economic future: a significant portion of the surplus was based on one-off federal funding from the American Rescue Plan Act.
Without this funding, the 2022 financial year surplus would be “modestly positive” $ 185 million and the 2023 financial year would have a “significant operating deficit”.
The OPM report found that Connecticut must see significant revenue growth over this biennium to avoid a large budget gap in FY 2024 and beyond.
The legislature’s bipartisan Office of Fiscal Analysis projects a deficit of $ 931.9 million for fiscal 2024, with a deficit of $ 670.3 million the following year.
Connecticut must “see significant revenue growth to avoid a large budget gap in FY 2024 and beyond.”
“One encouraging remark in recent years is that revenue growth has outpaced fixed cost growth, creating a positive structural balance,” said the OFA report, also released Nov. 19.
OPM’s Fiscal Accountability Report for Fiscal Years 2022-2026 shows the state’s long-term debt at $ 95.4 billion, up 4.1% from last year.
Connecticut’s debt per capita is one of the highest of any state, with pension obligations alone accounting for about 14% of annual government spending.
All of its fixed costs – pension payments, retirees’ health benefits, and debt servicing – make up about a third of Connecticut’s annual budget and consume much-needed resources from education, human resource development, healthcare, and transportation.
For more information, contact Ashley Zane at CBIA (860.244.1169) | @ AshleyZane9.