Comptroller Natalie Braswell today, in her monthly financial and economic update, projected a General Fund surplus of $1 billion for Fiscal Year 2022 and a substantial reduction of pension debt amid growing concerns over a potential recession.
“As volatility and uncertainty continue to cloud the nation’s economic outlook, Connecticut’s budgetary position is comparatively strong,” said Comptroller Braswell. “The Rainy Day Fund is filled to capacity and we will make another substantial payment later this year to reduce pension debt. If the nation does slip into a recession, as a number of economists warn is possible, the state is well-positioned to weather that downturn and protect Connecticut taxpayers.”
State law requires excess revenue in particularly volatile categories be automatically deposited into the Budget Reserve Fund (commonly known as the “Rainy Day Fund”). Those reserves are used to guard against potential service cuts or tax increases should a significant economic downturn occur. The fund has reached its cap of approximately $3.11 billion.
For the third consecutive year, deposits exceeding the Budget Reserve Fund’s cap will be used to pay down the state’s pension debt. Braswell is projecting $3.7 billion will be available to reduce the outstanding liability in the pension funds for state employees and teachers. Although the fiscal year ended on June 30, the final certification and subsequent deposits will occur later this fall.
In a letter to Governor Lamont, Braswell noted that the labor market remains strong. Nationally, there are nearly two job openings for every unemployed worker. Connecticut added 1,600 jobs in May and has now recovered 83% of the jobs lost during the pandemic, including 86% of private sector jobs. Three sectors — construction, professional and business services, and trade, transportation and utilities — have added jobs above pre-pandemic levels.
Connecticut’s per capita income of $82,918 is the third-highest in the country and, today, is increasing the state’s minimum wage to $14 per hour.
Despite the strong job market, inflation is having a punishing effect across the country. Consumer confidence and personal savings rates have dipped as families spend more for housing, travel and food. Rising interest rates, intended to tame inflationary pressures, are making homeownership more expensive. Nationally, the average cost of a monthly mortgage is up 45% from this time last year. Applications for new mortgages are down 20% in the same span, as the market grows more untenable for would-be first-time homebuyers.
A new state program called Time to Own has been created to help low- and moderate-income buyers with down payment and closing cost assistance. More information can be found at: www.chfa.org/TimeToOwn.
“Failure to build a sufficient supply of housing after the 2008 recession is driving up costs and forcing families to compete with investors,” said Braswell. “It should be a top policy priority across the board to help workers and families afford mortgages and rental costs to grow our middle class.”
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