COMPTROLLER LEMBO PROJECTS $470.5 MILLION SURPLUS, CITES STRONG YEAR-END TAX FILINGS
Contact: Chelsea Neelon
Comptroller Kevin Lembo today, in his monthly financial and economic update, projected a General Fund surplus of $470.5 million, citing strong revenue collections, particularly in estimated and final income tax payments.
Strong revenue collections in May have led to a growing surplus projection, up over $220 million since last month. A projected $300 million increase in the estimated and final payments portion of the income tax, coupled with growing income tax withholdings, have Connecticut well positioned as it continues its economic recovery from the COVID-19 pandemic. Recent improvements have also resulted in a projected surplus in the Special Transportation Fund and a significant anticipated deposit in the state’s Budget Reserve Fund (“Rainy Day Fund”).
“After enduring a tumultuous and volatile year, the growing projected surplus is not only welcome but indicates a positive sign of what’s to come for Connecticut as we continue to recover from the pandemic,” Lembo said. “As our economy continues to rebuild, and people return to the workforce, it will be critical that we not repeat the mistakes of the past and work strategically to grow the middle class and invest in Connecticut workers.”
Lembo cited the Rainy Day Fund as an example of smart economic planning. Currently, the fund is projected to reach $4.49 billion by the end of the fiscal year, approximately 22.3 percent of General Fund appropriations. A law that Lembo championed states that any balance above a 15 percent threshold would result in additional contributions to either the State Employees Retirement Fund or the Teachers’ Retirement Fund. This contribution will provide the state the ability to pay down its unfunded pension liabilities, creating more budgetary flexibility in years to come after decades of perpetual underfunding.
“Building our reserves by capturing volatile revenue will help protect Connecticut residents from tax increases and devastating cuts to safety nets programs during future downturns,” said Lembo. “It’s an incredible accomplishment that we’ve been able to grow that fund to capacity and I’m heartened to see such a significant anticipated payment that can be used to address unfunded pension liability and offer future generations of taxpayers some relief.”
In a letter to Gov. Ned Lamont, Lembo noted that Connecticut saw modest job gains this month and has now recovered 60.4 percent of the jobs lost since April 2020. The leisure and hospitality sector, which suffered the most significant jobs decrease during the pandemic, was the state’s fastest growing sector, though it has yet to return to pre-pandemic numbers. The housing market continues to be robust, with both list and median prices increasing. However, Lembo warned that the booming housing market may be leaving behind first-time homebuyers that are being pushed out of the market due to cost, lack of inventory and competition with investors.
“Connecticut’s economic future depends on keeping young people and young families in the state,” said Lembo. “While the unemployment rate continues to decrease and the housing market continues to boom, we have to keep in mind that most of the benefits are still concentrated with high-income earners. As economic trends continue to move in a positive direction, we must be diligent and make sure everyone in Connecticut gets to participate in its recovery.”
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