News From Kevin Lembo

COMPTROLLER LEMBO, IN EARLY REPORT ON FISCAL YEAR 2020 BUDGET, PROJECTS $126.1-MILLION SURPLUS

FOR IMMEDIATE RELEASE                                                  TUESDAY, SEPTEMBER 3, 2019

 

Contact: Tara Downes

               631-834-5234

               Tara.Downes@ct.gov

 

Comptroller Kevin Lembo today, while cautioning that it is premature in the fiscal year, issued his first monthly projection of the year on Fiscal Year 2020, reporting that the state is on track for a $126.1-million surplus. 

Fiscal Year 2019 year-end adjustments are still being processed and could have a significant impact on the final operating results for that year. Lembo said he expects to issue his preliminary reporting of unaudited operating results for Fiscal Year 2019 on Sept. 30. 

In a letter to Gov. Ned Lamont, Lembo said he is in agreement with the state Office of Policy and Management’s (OPM) most recent outlook report, which is a $15 million decrease from the initial budget plan due to a deficiency in the non-appropriated adjudicated claims account. 

“Our early surplus projection for Fiscal Year 2020 should be treated with cautious optimism, because while there are positive early trends, they are just that – early,” Lembo said. “It should also be noted that Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies. For now, economic indicators for the national and state economies are sending mixed messages, with some positive movement on income tax revenue and home price appreciation among lower-price tiers – but also some trends in the bond market that could be recession indicators. 

“Connecticut may be unable to control for volatility in the global financial markets or the U.S. trade war with China, but it can act to prepare financially for what may come,” Lembo said. “The state is closer and closer to achieving a financial milestone in building an adequate Budget Reserve Fund, and must continue to exercise financial discipline in this area.” 

Lembo advocated for legislation that now requires the state to be more disciplined in setting aside unanticipated revenue windfalls to protect the state against future recessions so that tax increases and program cuts can be minimized or avoided during economic recessions.  

The Budget Reserve Fund (BRF) 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 Year 2019, the cap was $3.2 billion that the state could receive in estimated and final income tax payments and revenue from the pass-through entity tax before transferring any additional revenue above that to the BRF.
  • If current projections are realized, a $949.7-million volatility transfer would be made to the BRF.
  • The current balance of the BRF is $1.18 billion.
  • Adding the estimated $949.7 million volatility transfer and the projected Fiscal Year 2019 surplus of $195.9 million would bring the year-end balance of the BRF to approximately $2.45 billion.
  • This would represent approximately 12.1 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 Budget Reserve Fund balance to the statutory target of 15 percent,” Lembo said.  

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




View PDF for Economic Indicators