Connecticut ended fiscal year 2016 on June 30 with a $315.8 million deficit, according to state Comptroller Kevin Lembo. He added that the budget reserve fund, which holds a balance of $406 million, should be enough to offset the general fund shortfall.
As final budget accruals continue to come in through July and August, Lembo will continue to report updates on fiscal year 2016 in the coming months until he releases the final unaudited number on Sept. 30 and the final audited report by Dec. 31. In September, Lembo will begin reporting early projections for fiscal year 2017, which began July 1.
In his letter to Gov. Dannel P. Malloy, Lembo said he agrees with the Office of Policy and Management’s (OPM) latest deficit projection, which is an increase of $56.7 million from last month. The most significant single adjustment to the general fund this month was a reduction in projected income tax payments of $75 million, which were largely driven by market volatility.
“Connecticut’s income tax collections have been revised downward throughout this fiscal year as capital-gains-related income tax receipts were constrained by market volatility – prompted by global factors, including the Chinese markets and now ‘Brexit’ – and payroll-related tax gains were hampered by lower than anticipated labor market activity,” Lembo said.
While revenue projections fell during the year, Lembo noted that the aggregate result of cost-cutting measures implemented by both the governor and legislative action reduced anticipating spending by $156.6 million.
The comptroller added that while the state economy continues to recover at a positive but slow rate, the latest trends in the housing market and in household spending can be viewed as good omens for continued growth.
“A bright spot in the state’s economy has been the number of housing sales,” Lembo said, citing reports that single-family home sales in Connecticut grew by 16.2 percent in April from the same month last year and sales prices for those homes rose by 0.8 percent in April compared to a year ago. “This is the first price gain after 12 consecutive months of price drops on a year-over-year basis.”
Lembo further noted the recent release of consumer spending data by the Commerce Department, where “Nine of 13 major categories showed increases in demand in May from the prior month with gains led by gasoline stations, online retailers and hobby and entertainment stores.”