Comptroller Natalie Braswell today, in her first monthly financial and economic update, projected a General Fund surplus of $1.48 billion for Fiscal Year 2022 while urging policymakers to maintain positive economic momentum.
“There are some really promising signs in this month’s economic data including a substantial surplus projection,” said Braswell. “While this is undeniably good news, we can’t lose focus on the long-term budgetary reforms that have helped get Connecticut’s fiscal house in order. I encourage policymakers to explore all options to grow the middle class and lower the cost of living in our state, but they must be done in a sustainable manner that doesn’t rely on federal interventions that can’t be counted on in future years.”
Braswell noted that the state’s economy continues to modestly expand and add jobs, but significant federal aid during the pandemic, federal assistance programs that have since expired, and a temporary change to Medicaid reimbursement all contributed to the current surplus projection and none can be depended on to impact future fiscal years.
Continuing a trend in the pandemic recovery, this month’s economic indicators reflect an improving but tumultuous reality. Job growth slowed nationally as the Omicron variant spiked COVID-19 cases across the country. Consumer retail spending also disappointed, reflecting concerns over inflation. However, the national real Gross Domestic Product increased by 5.7% over the previous year, the highest increase since 1984.
Connecticut added jobs in December for the twelfth consecutive month. Manufacturing was the state’s highest gaining sector last month, adding 800 new positions. Overall, Connecticut’s continued unemployment claims have receded to pre-pandemic levels and the state has recovered 74.6% of the jobs lost during the pandemic.
The local housing market still does not have sufficient inventory to meet demand, resulting in a slowdown of overall sales but a continuation of high sales prices. In December, the average single-family home in Connecticut sold for over its list price. Renters have seen sustained cost increases as well with prices rising 9.24% year-over-year, raising red flags about overall housing affordability.
“The pandemic is still a tremendous destabilizing force,” said Braswell. “Overall, the economy is regaining its footing and trending in a positive direction, but we continue to face unique and unpredictable challenges both on a global scale and in our daily lives. Our government has a responsibility to help our most vulnerable residents navigate this immediate crisis, and the relative stability of Connecticut’s budget situation presents an opportunity to invest in making the state more equitable, affordable and attractive. However, with so much lingering uncertainty, it’s imperative that we maintain predictability and stability of state finances and not revert to same short-term thinking that took years of fiscal discipline to correct. We need change, but it must focus on a big picture view that offers real, lasting relief for our residents and businesses.”
In a letter to Governor Ned Lamont, Braswell noted that revenue increases in volatile categories and the projected surplus would result in another large deposit into the state’s Budget Reserve Fund (“Rainy Day Fund”). Because the fund has already reached its statutory cap, those funds — currently estimated at $2.33 billion — would be available to pay down pension debt and other state bonded indebtedness.
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