News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $594.5-MILLION DEFICIT; SAYS WAGES CONTINUE TO LAG BEHIND JOB GROWTH

Monday, July 2, 2018 | Contact: Tara Downes (631) 834-5234 | Tara.Downes@ct.gov

Comptroller Kevin Lembo today projected a Fiscal Year 2018 deficit of $594.5 million, which is lower than earlier recent projections due to a combination of lower agency spending and a net improvement in revenues.

In his economic summary, Lembo said that while the private sector has fully recovered the number of jobs lost to the recession (unlike the public sector), wage growth has failed to keep pace. Several concerning factors have coincided with shrinking wages, as recently reported by The New York Times, including less competition across markets, a dramatic decline in unionization (particularly in the private sector), and other long-term implications.

In a letter to Gov. Dannel P. Malloy, Lembo said this latest monthly projection is only slightly lower than the state Office of Policy and Management’s (OPM) due to a recent state settlement delay.

A likely one-time windfall in estimated and final income tax collections, totaling $4.54 billion, means that approximately $1.39 billion of income tax revenue exceeds the state’s new volatility threshold. Lembo – a longtime proponent of the volatility measure – said that approximately $779.4 million will likely be transferred to the state’s Budget Reserve Fund (BRF), which would bring the BRF to a total of approximately $992.3 million (about 5.25 percent of the state’s General Fund budget). Lembo has long recommended that the BRF reach 15 percent to protect against a future downturn.

“Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies,” Lembo said. “Recent indicators show that the State of Connecticut continues to lag behind the nation’s economic recovery in key areas.”

The private sector has now exceeded its pre-recessionary employment levels by 102.3 percent – however, mostly due to significant loss in government jobs, Connecticut has only recovered about 81 percent of its overall jobs lost to the recession. And while the private sector has recovered more than the number of jobs lost, Lembo said the wages attached to those jobs are weaker.

Lembo – pointing to an analysis by The New York Times – urged policymakers to focus on factors that have compromised wage growth and, consequentially, the state budget.

 

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