The state authorities charged with the financial books foresee growth in their November report on the current fiscal year and on the three fiscal years to follow, including better-than-expected revenues across the coming two fiscal years.
In the give-and-take of economic forecasting, the Legislature-mandated report sees evidence the recent federal shutdown crimped the economy while the state books also flirt with a budget surplus by next summer.
The state Office of Policy and Management (OPM) and the General Assembly”™s Office of Fiscal Analysis (OFA) recently released their consensus revenue estimates for the current fiscal year and the next three fiscal years.
The revenue estimates for fiscal year 2014, as of Oct. 20, are $123.4 million higher than the previous estimate, issued last fall. The higher figure comes with the asterisk of being an economic Polaroid, according to OPM Secretary Ben Barnes. Compared with the adopted biennial budget, the consensus anticipates revenues $56.4 million higher in fiscal year 2014 and $32 million higher in fiscal year 2015.
“These estimates are a snapshot of the situation four months into the fiscal year,” Barnes said. “The federal shutdown seems to have hampered the economic recovery both nationally and in Connecticut, but we are not yet sure of the extent of that damage to state revenues, which are a month or two behind. As always, we will closely monitor revenues and expenditures and manage state government to ensure this year”™s budget will remain balanced and may even show a small surplus next summer.”
State law directs the OPM secretary and the OFA director to agree on and to issue consensus revenue estimates each November and to issue any necessary revisions in January and April. The comptroller issues the final consensus estimate, which must be in synch with the other two ”” matching either the OPM or OFA figure or falling between the two.
A pair of trending national numbers on cars will impact motor fuel tax revenues, which the state sees leaking money from the current $504 million to $493 million in 2018. First, vehicles are getting better mileage. In October 2007, the nation”™s cars averaged 20.1 miles per gallon; the August figure was 24.9 mpg. Second, the youths of today are moving back to cities, forgoing car ownership and driving less than a generation ago. The University of Michigan reported this past summer that in 1983, 96 percent of people in their 20s drove; today the figure is 87 percent. For 19-year-olds, the figure was starker: 87 percent drove in 1983; just 70 percent in August.
Along with motor fuel tax declines, the state foresees a financial cork further up the oil pipeline: decreased activity for fuel oil companies. They currently pay $380.7 million in annual taxes, but by 2018, that figure is expected to decline to $377.3 million.
The report foresees federal grant activity of $12.1 million annually remaining at that level through 2018.
With the economy on surer footing, the report predicts the state”™s current interest bounty of $4 billion annually to grow steadily each year to a total $6.6 billion in 2018.
The state looks to raise $14.4 billion in taxes this year. That figure will climb to $17 billion raised by taxes in 2018. The figure includes personal income taxes as well as estate taxes and taxes on entities that include cigarettes (featuring declining tax revenues from to current $390.4 to $347.8 million in 2018) and alcohol (which gains tax steam, from $59.8 million to $61.4 million).
Total general fund revenues of $17.25 billion this year will reach $19.195 billion by 2018, with both figures already accounting for refunds and returns.
The law requires the state comptroller to issue the consensus estimate, which must either equal one of the separate OPM or OFA estimates or fall between the two.
“The new estimates show that Governor Malloy”™s focus on jobs and the economy, coupled with his prudent fiscal management, are showing positive results in state revenues,” Barnes said.
