News From Kevin Lembo

COMPTROLLER LEMBO PROJECTS $58.8-MILLION DEFICIT FOR FISCAL YEAR 2020

FOR IMMEDIATE RELEASE                                                 MONDAY, FEBRUARY 3, 2020

 

Contact: Tara Downes
              (860) 702-3308
              Tara.Downes@ct.gov


Comptroller Kevin Lembo today, in his monthly updated financial and economic outlook, projected that the state is currently on track to end Fiscal Year 2020 with a $58.8-million budget deficit.

In a letter to Gov. Ned Lamont, Lembo said his office’s projection is in agreement with the most recent projection by the state Office of Policy and Management (OPM), a $35.8-million increase since last month’s projection and following an updated consensus revenue forecast reached by OPM and the Office of Fiscal Analysis (OFA).

Lembo reported that the primary reason for the increase in the General Fund deficit was a net $32 million decrease in revenues. A $300-million reduction in the Estimated and Final Payments portion of the income tax was offset by a $300-million increase in the Pass-Through Entity Tax, consistent with what Lembo’s office had been tracking in recent months. Tax refunds also increased by $65 million, the Inheritance Tax by $15 million and casino gaming payments by $10 million (the latter because competition from Massachusetts casinos had less of an impact than initially forecast).

“Connecticut’s need to maintain financial discipline more than ever to protect against revenue volatility – and the inevitability of the next recession,” Lembo said. “While we may be unable to control international trade policy or the financial markets, Connecticut can prepare for what happens to them by continuing to build the Budget Reserve Fund until it meets the state’s 15-percent threshold.”

The statutory revenue volatility cap, which requires revenue above a certain threshold to be transferred to the Budget Reserve Fund (BRF) – often referred to as the “rainy day fund” – is $3.3 billion for estimated and final income tax payments and revenue from the pass-through entity tax for Fiscal Year 2020.

The update for the BRF outlook is:

  • If current projections are realized, a $318.3-million volatility transfer would be made to the BRF at the close of the fiscal year;
  • The balance of the BRF currently stands at $2.5 billion;
  • Adding the estimated $318.3-million volatility transfer, less the projected FY 2020 deficit of $58.8 million, would bring the year-end BRF balance to approximately $2.8 billion;
  • This balance, if achieved, would represent approximately 13.8 percent of net General Fund appropriations for FY 2021.

“Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies,” Lembo said.

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