Connecticut Comptroller Kevin Lembo has forecast the state will show a $245.7 million surplus at the end of the current fiscal year.
In a letter to Gov. Dannel P. Malloy that outlined the financial statements for the General Fund and the Transportation Fund through Oct. 31, Lembo said his office is projecting the General Fund will end fiscal year 2019 with a $245.7 million surplus, slightly lower than the $245.9 million forecast by the Office of Policy and Management. Lembo said that his forecast represented “an $87.9 million improvement from last month’s estimate,” which he attributed to changes in the revenue picture.
“The most significant revenue change was an upward revision of the withholding portion of the personal income tax, which increased by $90.8 million,” he wrote. “The consensus forecast also made adjustments to refunds of taxes (+$42.2 million) and the earned income tax credit (-$24.1 million), which resulted in a net decrease in revenue of $18.1 million. Casino gaming payments increased by $20 million due to better than expected results in light of new interstate competition. The remaining consensus revenue changes netted to a negative $5.7 million.”
Lembo also pointed out that the “withholding portion of the income tax continues to perform well year-to-date, in line with job gains in recent months.” He acknowledged tumult in the stock market during October and November, but added that “estimated and final income tax payments are still ahead of last year’s pace and collections are exceeding FY 2019 budget targets.”
But Lembo also warned that his forecast should not be viewed as reason for celebrating. “While predicting the timing of recessions can be notoriously difficult, the lesson for Connecticut policy makers should be clear,” he stressed. “State government should maintain spending discipline and continue building the balance in the Budget Reserve Fund to protect against the inevitable downturn whenever it comes.”