COMPTROLLER LEMBO PROJECTS SMALL SURPLUS BUILT ON VOLATILE REVENUE AND PROGRAM CUTS THAT MAY HAVE LONG-TERM CONSEQUENCES
Comptroller Kevin Lembo today said the state is now on track to close the 2017 fiscal year with a small surplus – but warned that it’s based on volatile revenue, including the inheritance and estate tax, and program cuts that may have long-term economic ramifications.
In a letter to Gov. Dannel P. Malloy, Lembo said this small $35.7-million surplus – an improvement of $142.9-million from last month – may be good news in the short term, but potentially problematic in the long run.
“Today’s small gain could be tomorrow’s great pain when state program cuts – particularly those to early childhood programs – produce long-term economic problems,” Lembo said. “This small surplus is no measure of success, but simply the result of one-time volatile revenue and potentially damaging cuts to early childhood education.”
Lembo pointed to research by the W.E. Upjohn Institute for Employment Research, which found that universal preschool provided early in life has – in the long run – more than twice the projected annual impact on state job growth than direct business subsidies.
“This could be a big problem in Connecticut where state budget constraints have derailed millions of dollars to fund a long-term high-quality preschool plan, even as the state borrowed tens of millions of dollars to deliver incentive packages to the two largest hedge funds in the world.
“The facts tell us this: when we prioritize the game of picking corporate winners and losers over early childhood education, then everyone loses,” Lembo said. “Connecticut must keep a close eye on the long-term ramifications of short-term fixes.”
Overall, Fiscal Year 2017 saw revenue decline from initial budget projections, Lembo said. The income tax is expected to fall $532.2 million short of the budget plan and the sales tax is expected to fall $136.8 million below expectations.
On the spending side, following deficit mitigation efforts, net expenditures are estimated to be $181.6 million below the budget plan. State payroll is running almost seven percent below last year’s level and general agency operating expenditures were down by over 10 percent.“Connecticut’s overall budget performance is ultimately dependent upon the performance of the national and state economies,” Lembo said.
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