News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $195.9-MILLION SURPLUS FOLLOWING NEWLY ENACTED BUDGET LEGISLATION

FOR IMMEDIATE RELEASE                                                  THURSDAY, AUGUST 1, 2019

 

Contact: Tara Downes

(860) 702-3308 | Email


Comptroller Kevin Lembo today announced that the state is on track to close Fiscal Year 2019 with a surplus of $195.9 million, a decrease of $505 million from last month’s estimate due to newly enacted budget legislation. 

In a letter to Gov. Ned Lamont, Lembo said that his latest projection is in line with the state Office of Policy and Management’s (OPM) latest report, which accounts for two provisions of the recently adopted budget that relies on $540 million in FY 2019 resources. Lembo said the budget act will use $380.9 million to establish a special capital reserve fund for the Teachers’ Retirement System and $160 million to be used for a comprehensive hospital settlement. 

Lembo said that, while the state has marked the beginning of a new fiscal year (2020), year-end adjustments are still being processed for Fiscal Year 2019 – and so this office will provide its preliminary operating results for Fiscal Year 2019 on Sept. 30 and the final audited report at the end of December. 

Lembo said that, despite the decreased surplus related to budgetary actions, state tax revenue actually saw a net increase this month due to increased income tax collections by $60 million in total ($20 million from withholding receipts and $40 million from estimated and finals payments). The increased estimated and final payments revenue will go directly to the Budget Reserve Fund. Lembo, who successfully advocated for strong Budget Reserve Fund legislation in recent years, urged for continued discipline in rebuilding the Budget Reserve Fund.  

“If our state can keep to this promise, and maintain financial discipline, then Connecticut could be on the verge of a new day of fiscal stability and public trust,” Lembo said. “In the past, when economic downturns struck, state government was unprepared and had to make difficult policy choices in the midst of a crisis. The state was forced to raise taxes and cut spending at the worst possible time – just when the need for essential state services was growing. Connecticut cannot control financial markets, federal trade policy and global uncertainty – but our state can control how we prepare for those factors and protect against the devastation of economic recessions.” 

The Budget Reserve Fund legislation that Lembo advocated for, also referred to as the revenue volatility cap, requires that revenues above a certain threshold be transferred to the Budget Reserve Fund. The status of that policy is:

  • For Fiscal 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, a $940.5 million volatility transfer would be made to the Budget Reserve Fund.
  • The current balance of the Budget Reserve Fund is $1.2 billion. Adding the estimated $940.5 million volatility transfer and the remaining projected Fiscal Year 2019 surplus of $195.9 million would bring the year-end balance of the Budget Reserve Fund to just over $2.3 billion. This would represent approximately 12 percent of net General Fund appropriations for Fiscal year 2020

“In order to help protect against future economic downturns, Connecticut must maintain financial discipline and continue building the BRF balance 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.”

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