News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $28-MILLION DEFICIT FOR FISCAL YEAR 2020

FOR IMMEDIATE RELEASE                                                 THURSDAY, JANUARY 2, 2020

 

Contact: Tara Downes
              631-834-5234
              Tara.Downes@ct.gov


Comptroller Kevin Lembo today, in his monthly updated financial and economic outlook, projected that the state is currently on track to end Fiscal Year 2020 with a budget deficit of $28 million. 

Lembo also noted that key economic indicators included in this month’s outlook report include a new index measure of job quality in the United States. This measure, the U.S. Private Sector Job Quality Index (JQI), attempts to provide better information on the overall health of the U.S. jobs market.  Traditional economic statistics have focused on quantitative measures like job counts and unemployment rates, but these sometimes miss the larger story, Lembo said.  He said the JQI adds an additional dimension by classifying jobs as high wage/high hour jobs (high quality) or low wage/low hour jobs (low quality) and measuring changes over time. 

The JQI reveals that job quality nationwide declined significantly between 1990 through the Great Recession – and has plateaued since then. This trend is partially due to a persistent increase in lower paying service jobs and loss of higher paying goods-producing jobs, Lembo said.   

“Connecticut’s budget projections are a direct reflection of the performance of the national and state economies,” Lembo said. “In order to provide accurate forecasting and exercise the necessary fiscal discipline, our state must rely on the most valid and precise data possible with regard to employment levels and quality. We must also stay the course in maintaining our approach to building the state’s Budget Reserve Fund (BRF) as a safety net against a future economic downturn until it reaches its statutory target of 15 percent of the state’s General Fund.” 

In a letter to Gov. Ned Lamont, Lembo said the updated outlook largely reflects a $24-million net deficit projected in the fringe benefit accounts, primarily due to fewer than anticipated retirements. 

The statutory revenue volatility cap, which requires revenue above a certain threshold to be transferred to the BRF – often referred to as the “rainy day fund” – is $3.3 billion for estimated and final income tax payments and revenue from the pass-through entity tax for Fiscal Year 2020. 

The update for the BRF outlook is:

  • If current projections are realized, a $318.3-million volatility transfer would be made to the BRF at the close of the fiscal year;
  • The balance of the BRF currently stands at $2.5 billion;

  • Adding the estimated $318.3-million volatility transfer, less the projected FY 2020 deficit of $28 million, would bring the year-end BRF balance to approximately $2.8 billion;
  • This balance, if achieved, would represent approximately 13.9 percent of net General Fund appropriations for FY 2021.

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