November 1, 2022
The Honorable Ned Lamont
Governor of the State of Connecticut
State Capitol
Hartford, Connecticut
Dear Governor Lamont,
I write to provide you with financial statements for the General Fund and the Transportation Fund through September 30, 2022. The Office of the State Comptroller (OSC) is projecting the General Fund will end Fiscal Year 2023 with a $494.2 million surplus and the Special Transportation Fund will end Fiscal Year 2023 with a $321.2 million surplus. OSC is in general agreement with OPM's General Fund and Special Transportation Fund projections. The following analysis of the financial statements furnished by the Office of Policy and Management (OPM) is provided pursuant to Connecticut General Statutes (CGS) Section 3-115.
General Fund
In the third forecast for Fiscal Year 2023, the General Fund surplus is projected to be $494.2 million, an increase of $49.6 million from last month's projection due improvements in expenditures. Revenue projections remained unchanged from last month.
Projected FY23 expenditures have been revised downwards by $49.6 million due to increased lapses in several accounts. The Department of Social Services is expected to lapse $26.3 million due to the extension of enhanced federal funding through December 31 due to the public health emergency as well as revisions to the ARPA home and community-based services reinvestment plan. $152.5 million is projected to lapse at my office due to the State Employees Health Service Cost account and the Retired State Employees Health Service Cost account. Approximately half of the forecasted lapse in the retiree health account is due to favorable rates negotiated by my office for the state Medicare Advantage program with the remainder of the lapse due to a greater than anticipated number of retirees transitioning directly into Medicare upon retirement and a decrease in Medicare Part B premiums effective January 1.
This month's forecast also reflects a net $17.74 million reduction in expenditure requirements as a result of appropriation transfers out of the General Fund totaling $16.97 million from OPM's Reserve for Salary Adjustment account and $0.77 million from OPM's Private Providers account. While these funds were appropriated in the General Fund, these transfers were necessary to support contractual requirements in other funds.
Special Transportation Fund
In the third forecast for Fiscal Year 2023, the Special Transportation Fund surplus is projected to be $321.2 million, a decrease of $5.9 million from last month's projection due to increased expenditure requirements as a result of appropriation transfers from OPM's General Fund Reserve for Salary Adjustment account, as well as lapses at the Department of Transportation due to the availability of temporary federal support for transportation projects. Projected FY23 revenue remained unchanged from last month.
Economic Indicators
The labor market remains strong with plenty of job openings both nationally and in Connecticut. The U.S. added 263,000 jobs while the unemployment rate fell to 3.5% in September. Connecticut added 4,400 jobs while the state's unemployment rate fell to 4%. The U.S. has recovered 100% of the jobs lost during the Covid-19 recession and Connecticut has recovered 89.2%.
Inflation remains elevated and high prices for necessities such as groceries, gasoline, and rent continue to burden households. The Federal Open Market Committee is meeting in November and is expected to increase interest rates again in order to reduce consumer demand and bring down inflation. The stock market rallied in October amid strong earnings reports. Following two consecutive quarters of decline, third quarter GDP increased by 2.6% driven by increases in exports and continued health consumer spending, as well as increased governmental spending and a decrease in imports. Consumer confidence declined in October indicating consumers are pessimistic about current conditions are concerned about a looming recession.
My office also issues an Annual Comprehensive Financial Report as an accounting supplement to the budgetary report. This annual report includes financial statements for all state funds and component units prepared in accordance with Generally Accepted Accounting Principles (GAAP). From a balance sheet perspective, the GAAP unassigned fund balance in the General Fund was a negative $660,749 as of June 30, 2021.
If you have any questions on this report, please do not hesitate to contact me.
Sincerely,
Natalie Braswell
State Comptroller