FOR IMMEDIATE RELEASE
COMPTROLLER LEMBO PROJECTS $306.9 MILLION SURPLUS, DRAWS ATTENTION TO ISSUES FACING RENTERS AND FIRST-TIME HOMEBUYERS
Comptroller Kevin Lembo today, in his monthly financial and economic update, projected a General Fund surplus of $306.9 million for Fiscal Year 2021 as job gains and a strong housing market continue to drive Connecticut’s recovery.
Connecticut added 3,500 jobs in June, the sixth consecutive month of job growth. The state has now recovered 64.6 percent of the jobs lost during the COVID-19 pandemic. Large gains in the leisure and hospitality sector reflect larger economic trends of a renewed market for services. Demand is increasing as consumer behavior rebalances following pandemic-related lockdowns and the subsequent vaccination efforts.
“Overall, the economic signs are positive for Connecticut,” said Lembo. “Service industry workers are getting back to work and the continued strength of the housing market and stock market, combined with generous federal aid, have led to increased revenue, supporting the state budget and driving the projected surplus.”
Lembo warned that the unpredictability of the delta variant and low vaccination rates in other states could negatively impact both the national and state economies. While inflation concerns also remain, Lembo urged a wait-and-see approach as the pandemic is still creating unique supply and demand issues that may not be signs of more widespread inflation.
Connecticut’s housing market continues to thrive. Inventory decreased in June compared to last year but, on average, home sale prices were up over 20 percent while the average time on the market was cut in half. Lembo cautioned against the unintended consequences of the housing boom, however, noting new concerns for renters and first-time homebuyers.
The strong market for home sales is also driving up rental costs across Connecticut. Over 130,000 renters in the state are currently behind on their rent and, with eviction moratoriums expiring, there is a growing concern over housing insecurity.
“Helping renters stay housed should be a critical economic and public health priority,” said Lembo. “If folks are forced into more congregate settings — or worse, homelessness — it will impede our continued efforts to contain the virus and our efforts to support working people and grow the middle class.”
Similarly, Lembo noted that the low inventory of single-family homes and extremely competitive market has left would-be first-time homebuyers behind.
“Connecticut needs to keep young people in our state,” said Lembo. “We’ve made great strides in that effort in recent years, but the rising cost of rent combined with the low availability of affordable homes could threaten that progress. I encourage policymakers to begin working now on potential solutions and not let the unintended consequences of our strong housing market develop into a preventable crisis.”
In a letter to Governor Lamont, Lembo noted that his surplus projection is approximately $35 million greater than the estimate provided by the Office of Policy and Management in July. The difference is attributable to increased revenue projections, most notably an increase in withholding receipts due to recent job growth.
Lembo is forecasting a transfer of approximately $1.2 billion to the state’s Budget Reserve Fund (“Rainy Day Fund”) in addition to the projected surplus. Under Connecticut’s volatility cap, excess revenue in specific volatile categories is held in reserve. Because the fund has already reached its statutory limit, an estimated $1.4 billion is projected to be allocated to pay down unfunded pension liabilities.
“As the last year-and-a-half have demonstrated, the economy can change course quickly and the best thing government can do is to be prepared,” said Lembo. “Building our reserves to capacity not only prevents against future downturns, but the policies put in place will also save taxpayers money in both the short- and long-term.”
Lembo said that, while the state has marked the beginning of a new fiscal year (2022), year-end adjustments are still being processed for Fiscal Year 2021. Preliminary year-end reporting for Fiscal Year 2021 will be released on Sept. 30 and the final audited report by the end of December.
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