STATE OF CONNECTICUT
NANCY WYMAN COMPTROLLER	OFFICE OF THE STATE COMPTROLLER 55 ELM STREET HARTFORD, CONNECTICUT 06106-1775	MARK OJAKIAN DEPUTY COMPTROLLER

State Comptroller Nancy Wyman today announced that the state ended the 2001 fiscal year with a net budget surplus of $30.6 million, and projected that declining tax revenues will produce an even smaller surplus in the current fiscal year.

The $30.6 million is the remainder of a gross surplus of $606.8 million for the fiscal year that ended June 30. The General Assembly appropriated $576.2 million of the gross surplus for various programs, and the remaining $30.6 million will automatically be deposited into the state's emergency Rainy Day Fund.

Wyman's current surplus projection for the end of the 2002 fiscal year stands at $150,000 - the amount built into the current state budget approved by the legislature.

Wyman said her projection of a shrinking surplus for 2002 is due to a "growth recession" in the state's economy that produced a sharp drop in tax revenues in the second half of fiscal 2001 and may continue through the current fiscal year. (See attached summary).

"Tax revenues are down dramatically, mainly due to very weak growth in jobs and sluggish consumer spending," Wyman said. "But even if this growth recession continues, it appears the state should end the 2002 fiscal year with a small surplus or at least a balanced budget."

Wyman has long advocated that any surplus be used to pay off the state's enormous $10.3 billion bonded debt and to increase the Rainy Day Fund. But she noted that only the statutory minimum deposit was made to the Rainy Day Fund from the 2001 surplus, and that none of the surplus was used to pay off any of the debt.

Meanwhile, the state's bonded debt climbed by $527 million in fiscal 2001, she said.

Comptroller's Economic Summary for Fiscal Year 2001

Employment

• Fiscal Year 2001 was marked by the slowest job growth since 1993, reflecting a national trend. Just 4,000 jobs were added to non-farm payrolls. Over the previous three fiscal years, an average of over 28,000 jobs had been added to Connecticut payrolls. July employment numbers remained weak with a loss of 1,200 jobs between June and July. Over the 12-month period ending July 2001, the state has lost 200 jobs.

Income Tax Revenue

• Income tax revenue generated by payroll employment withholding showed strong double-digit growth at the beginning of the 2001 fiscal year, but a slowing trend began to take hold by the middle of the year.

• The estimated payment portion of the income tax (which includes capital gains) performed well throughout fiscal 2001. Growth averaged close to 20% all year. The strong performance of this component of the income tax helped to mask some of the weakness that appeared in the payroll withholding numbers. July income tax accruals (which apply to withholding only) increased 6.1%, continuing the downward trend in withholding receipts.

Sales Tax Revenue/Consumer Spending

• After a strong performance through the first half of fiscal 2001, sales tax revenue gains began a decline that has continued through fiscal year-end. With accruals, the increase in 2001 sales tax receipts slipped to slightly less than one percent.

• Over the past year, however, consumer spending has been credited with keeping the economy out of recession. Personal consumption expenditures increased by almost 5% in 2000 and through the first half of 2001 gains of over 3% have been posted. The greatest strength has been in durable goods spending (big-ticket items). Economists are hopeful that falling interest rates, tax rebates, and lower energy costs will add strength to consumer spending in the last quarter of 2001 and position the economy for stronger growth in fiscal 2002.

• Retail sales growth for the twelve-month period ending in June of 2001 was 3.5%; however this is about half the rate of growth recorded in June of the previous three years. Retailers remain concerned that this trend will continue through the end of the year, and are reducing holiday inventories in response.

Corporate Profits

• After beginning the year in marginally positive territory with corporate profit growth of 0.3%, profits began a sharp decline. In the 2000 fiscal year, quarterly corporate profit growth averaged 2.5%. In fiscal 2001, the average through the 1st quarter was a decline of 3.9%.

• A survey of purchasing managers had some positive news in July. Only 36% judged the economy to be showing signs of worsening in the future as opposed to 51% in the previous quarter. The survey indicated that tight inventory control has positioned businesses to quickly take advantage of any increases in consumer demand.

Housing & Construction

• In June 2001, new housing permits in the state were down a sharp 6% from June 2000. On a year-to-date basis the decline was a more modest 2.6%.

• Existing home sales showed a healthy rise of 5.7 percent over June of last year. During fiscal 2001, existing home sales posted an annual increase of close to 2%. Median sale prices have continued to increase. The home price index in Connecticut is up 10% over last year and construction contract awards were up 4.4% from last June.

The State Comptroller appreciates input on this and other issues from residents of the state. Please feel free to contact her office by phone - (860) 702-3300; mail - OSC, 55 Elm Street, Hartford, CT 06106; or, via E-mail - osc.opinions@po.state.ct.us

Learn more about the Connecticut Comptroller's Office by calling up our Internet Home Page, at the link below.

For Immediate Release
September 4, 2001

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