Connecticut is on track to end fiscal year 2019 with a $700.9 million surplus, according to a projection released by Comptroller Kevin Lembo. However, Lembo said that the surplus level could be reduced by $540.9 million pursuant to Public Act 19-117, which creates a special capital reserve fund for both the Teachers’ Retirement System and a for settlement with hospitals.
Lembo said his latest projection aligned with a forecast released in April by the Office of Policy and Management. He attributed the surplus to the overperformance of several revenue categories including the sales and use tax (+$39.9 million), the corporate tax (+$25 million), the inheritance and estate tax (+$16.5 million) and the public service corporations tax (+$17.5 million).
Lembo said that while the pass-through entity tax also improved by $110 million, it was offset by a $100 million reduction in the estimated and final payments portion of the income tax.
“These overperforming revenue categories are positive signs,” Lembo said. “However, 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 also noted that if current projections are realized, an $895.5 million volatility transfer will be made to the budget reserve fund, which is now at $1.2 billion. The addition of the $895.5 million volatility transfer and the remaining projected year-end surplus of $160 million would bring the year-end balance of the budget reserve fund to $2.24 billion.
However, Lembo warned that the state’s budget’s results were “ultimately dependent upon the performance of the national and state economies.”