News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $700.9-MILLION SURPLUS FOLLOWING REVENUE IMPROVEMENTS



MONDAY, JULY 1, 2019 | Contact

Comptroller Kevin Lembo today announced that the state is on track to end the 2019 fiscal year with a $700.9-million surplus, though he noted that amount will be reduced by $540.9 million pursuant to Public Act 19-117 for appropriations to cover funding for a new special capital reserve fund for the Teachers’ Retirement System and a settlement with hospitals.

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, an increase from last month’s projection due to several revenue categories over-performing.

Revenue categories over-performing above what was projected in the April consensus forecast by OPM and the legislature’s non-partisan Office of Fiscal Analysis (OFA) include the Sales and Use Tax (+$39.9 million), the Corporate Tax (+$25 million), the Inheritance & Estate Tax (+$16.5 million) and the Public Service Corporations Tax (+$17.5 million).

The Pass-Through Entity Tax also improved by $110 million, although it was offset by a $100-million reduction in the estimated and final payments portion of the income tax.

“These over-performing revenue categories are positive signs – however, in order to help protect against future economic downturns, Connecticut must maintain financial discipline and continue building the Budget Reserve Fund balance to the statutory target of 15 percent,” Lembo said.

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 volatility cap is $3.2 billion for estimated and final income tax payments and revenue from the Pass-Through Entity Tax.
  • If current projections are realized, an $895.5 million volatility transfer will be made to the Budget Reserve Fund.
  • The current balance in the Budget Reserve Fund is $1.2 billion.
  • Adding the estimated $895.5 million volatility transfer and the remaining projected year-end surplus of $160 million would bring the year-end balance of the Budget Reserve Fund to $2.24 billion.
  • This projected year-end balance, if realized, would represent approximately 11.6 percent of net General Fund appropriations for Fiscal Year 2020.
  • Reaching 15 percent of net General Fund appropriations is the target, Lembo said.

“Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies,” Lembo said.

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