COMPTROLLER LEMBO REPORTS $150.1-MILLION SURPLUS FOR FISCAL YEAR 2013|
Wednesday, May 1, 2013 | Contact: Tara Downes (860.702.3308 | Tara.Downes@po.state.ct.us)
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Comptroller Kevin Lembo today announced that the state's financial outlook has improved and the Fiscal Year 2013 will likely end with a surplus of approximately $150.1 million.
This surplus is based on Generally Accepted Accounting Principles (GAAP), whereas the surplus would reach approximately $197.6 million on a modified cash basis accounting.
In a letter to Gov. Dannel P. Malloy, Lembo said that he generally agrees with the Office of Policy and Management's (OPM) projection this month, which incorporates the consensus revenue projections announced Tuesday.
Lembo cautioned that the surplus is good news for the current fiscal year, but is largely attributed to unreliable revenue sources that the state may be unable to count on in the following years.
"This growing surplus is good news for this fiscal year - but should lead only to cautious optimism for future years," Lembo said. "The surplus is largely attributable to unanticipated windfalls from the inheritance and estate tax and capital gains, both unpredictable revenue sources that may not continue into the next fiscal year."
Since last month, revenues are up $247.1 million, which is slightly offset by a projected $15.9-million increase in spending. The increase in the capital gains tax rate for 2013 that resulted from the expiration of the Bush-era tax cuts provided an incentive to distribute gains before the end of calendar 2012. According to the Bureau of Economic Analysis data, net dividend distributions in the fourth quarter of 2012 were 23.2 percent higher than in the same period last year. Therefore, taxable gains have been realized in Fiscal Year 2013 that otherwise would have been paid in future fiscal years. In addition, the stock market has experienced double-digit growth that may not continue into the next biennium, Lembo said.
These factors have resulted in the income tax exceeding budget projections by $109.6 million, estimated income tax payments are up more than 20 percent from last year, and final payments are up almost 16 percent. In addition, the inheritance and estate tax, which had been expected to exceed original budget estimates by $150 million, is now projected to generate $262.4 million over the original budget.
"These one-time revenue gains in Fiscal Year 2013 are tempered by losses in other major recurring revenue sources," Lembo said.
The sales tax is projected to fall $189.3 million short of initial projections, showing almost no growth over last year's receipts. While the combined income tax exceeds budget projections, the payroll-driven withholding component of the tax, which is the largest component, is not growing.
General Fund spending in Fiscal Year 2013 is expected to be about 2 percent above the prior year, which is a historically slow rate of budget growth, Lembo said.
"I am pleased to hear ongoing discussions about the benefit of using any surplus to replenish the Rainy Day Fund, which would provide the state with greater financial security and budget stability going forward."
"Continued slow economic growth raises budget concerns moving into the next biennium." Lembo said.
|Read the Comptroller's Full Letter | View PDF for Economic Indicators|