Comptroller Natalie Braswell today, in her monthly financial and economic update, projected a Fiscal Year 2023 General Fund surplus of $444.6 million, noting Connecticut’s budget continues to perform well as economic trends cloud future forecasts.
“Though uncertainty and recurrent concerns remain on the national level, Connecticut’s financial standing is stable and well prepared for the future,” said Braswell. “The labor market remains incredibly strong for jobseekers, and recent efforts to save on long-term costs and grow the Rainy Day Fund will guard against budgetary impacts from factors outside of our control. However, high costs for essentials like food and housing continue, as families wrestle with persistent inflation.”
Connecticut added 2,900 jobs in August, the eighth consecutive month of gains. The private sector is nearing a full recovery of the jobs lost during the onset of the pandemic, but only 50.8% of public sector jobs have returned. Overall, the labor market remains tight, with far more job openings than jobseekers.
Despite the strong job market, several negative trends are also persisting. The housing market continues to suffer from low inventory, driving up prices — and squeezing out would-be first-time homebuyers — both nationally and in Connecticut. Rising interest rates are resulting in fewer new mortgages. Rental costs in the state dropped slightly this month, though it is too soon to know if that will continue in future months.
Falling gas prices have provided taxpayers a much-needed reprieve, though inflation persists in other key areas, including food and basic necessities. Gross Domestic Product (GDP) declined for two consecutive quarters, elevating concerns of an impending recession. However, consumer confidence increased this month as did consumer spending and personal income rates.
In a letter to Gov. Ned Lamont, Braswell noted that the effects of a new Medicare Advantage contract for retiree health coverage, which she announced in June, are now appearing in expenditure forecasts. A lapse of $131M is expected in the retiree health account for FY23 because of the contract savings and many new retirees immediately enrolling in Medicare coverage.
In September, Braswell certified a $2.8 billion volatility transfer that has been used to pay down pension debt. The FY22 budget surplus of $1.26 billion will also be available to pay down debt after audited year-end findings are completed in December.
“The long-term planning and fiscal discipline in recent years will help protect Connecticut residents from national — and global — turmoil,” said Braswell. “But there is no doubt that families in our state are also struggling right now. As always, policymakers should collaborate to help those who need it most while maintaining the culture of fiscal sustainability that has helped stabilize state finances.”
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