Comptroller Natalie Braswell today, in her monthly financial and economic update, announced that the state’s General Fund surplus has grown to $1.27 billion for Fiscal Year 2022, though a strong labor market amid high inflation and slowed growth send mixed messages about what the next economic downturn will look like.
“Our state’s financial outlook continues to excel – but a strong labor market, negative GDP and low consumer confidence are blurring economic predictions,” Comptroller Braswell said. “Connecticut learned hard lessons when our state was caught flat footed by the Great Recession with depleted financial reserves, skyrocketing unfunded liabilities and debt that forced hiring freezes, program cuts and tax increases at the worst possible time for families.
“Those hardships were transformed into smart budget reforms that Connecticut can now use to protect families and fuel our economy. Those reforms established a fully funded Budget Reserve Fund and an accelerated paydown of Connecticut’s unfunded liabilities and debt. Our state must stay the course on smart financial decisions – because strong reserves and lower debt will ensure more resources are available to fuel our economy and provide relief to families.”
In a letter to Governor Lamont, Braswell noted that this month’s surplus projection increased by $231 million since last month due to $157.8 million in increased tax and other revenue growth, driven by a strong labor market, and a $73.3 million reduction in budgeted net expenditures.
Fiscal Year 2022 revenue will continue to accrue through Aug. 5. The unaudited year-end numbers will be available by the end of August or early September.
Braswell said that – if current projections hold – approximately $4.1 billion will be used to further reduce the state’s unfunded pension liabilities. This means a better financial position for the state, and more opportunities for Connecticut to focus on much-needed relief and investments that benefit everyone.
The state’s revenue volatility cap requires that certain overperforming revenue categories be immediately transferred to the Budget Reserve Fund. However, now that the state’s reserves are fully funded – reaching their statutory maximum of 15% of General Fund appropriations – the excess revenue can be used to pay down debt. The table below outlines how the money will be used pursuant to statute:
Braswell said these reserves and lower debt will be key in protecting Connecticut against economic recession.
“A strong labor market coexists alongside declining growth and high inflation,” Braswell said. “Even if the signs are unclear, consumers are concerned a recession is here.”
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