News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $580.9-MILLION SURPLUS; URGES CONTINUED FISCAL DISCIPLINE TO PROTECT CT AGAINST FUTURE ECONOMIC UNCERTAINTY

FOR IMMEDIATE RELEASE                                                  WEDNESDAY, MAY 1, 2019

 

Contact: Tara Downes

631-834-5234

Tara.Downes@ct.gov

Comptroller Kevin Lembo today issued his latest financial and economic outlook, projecting the state is on track to end the 2019 fiscal year with a $580.9-million surplus, though he warned that Connecticut must adhere to its commitment to fiscal discipline so that the state’s reserves will be adequately prepared to protect against future economic uncertainty.

In a letter to Gov. Ned Lamont, Lembo said that his latest projection aligns with the state Office of Policy and Management (OPM)’s projection and reflects the latest consensus revenue forecast issued by OPM and the legislature’s nonpartisan Office of Fiscal Analysis (OFA) this week.

The latest projection reflects a $14.3 million net revenue improvement over OPM’s April 22 estimate. Key changes from the OPM-OFA consensus forecast this week included a $100-million increase in the withholding portion of the personal income tax, a reduction in the estimated and finals portion of the income tax and lower federal grant revenue. The pass-through entity tax, corporation tax and inheritance and estate tax were also revised upward with no changes in projected spending.

“This surplus, and an increasingly healthy Budget Reserve Fund, may signal good progress – but we must remember that while we cannot always control financial markets, federal trade policy and global uncertainty, we can control how we prepare for those factors as a state,” Lembo said. “Our state has gone from zero financial protection just a few short years ago, exposing us to devastating tax increases and program cuts. We are finally headed to a place where we can protect against a financial and economic downturn, and that’s where we need to stay focused.”

A state revenue volatility cap, adopted only a few years ago, requires that revenues above a certain threshold be transferred to the state’s Budget Reserve Fund (BRF). Lembo, who advocated for this measure and continues to push for a fully funded BRF, provided the following update:

  • For Fiscal Year 2019, the threshold (or “volatility cap) where any additional revenue from the estimated and final income tax payments and the pass-through entity tax must be transferred to the BRF is $3.2 billion.
  • If current projections are realized, an $885.5-million transfer would be made to the BRF.
  • The current BRF balance is $1.2 billion.
  • Addition the estimated $885.5 million transfer, plus the projected Fiscal Year 2019 surplus of $580.9 million, would bring the year-end balance of the BRF to $2.65 billion, or approximately 13.9 percent of Fiscal Year 2019 General Fund expenditures.

“This result, if achieved, would represent a significant improvement over the recent past and move the Budget Reserve Fund closer to the statutory target of 15 percent,” Lembo said. “Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies.”

Among this month’s economic indicators, Lembo highlighted an April 16 report by Bloomberg on the 2019 U.S. State Innovation Index in which Connecticut jumped to fourth in the nation of states identified as having the most innovative state economies. The top five were California, Massachusetts, Washington, Connecticut and Maryland, while the bottom five were Alabama, Louisiana, Arkansas, West Virginia and Mississippi. The economic report below explains more on the metrics.

[Click to view various economic indicators and trends from national and state sources]




Read the Comptroller's Full Letter | View PDF for Economic Indicators