October 3, 2016
The Honorable Dannel P. Malloy
Governor of the State of Connecticut
Dear Governor Malloy:
I write to provide you with financial statements for the General Fund and the Transportation Fund through August 31, 2016.
The Office of Policy and Management (OPM) is projecting that the General Fund will end Fiscal Year 2017 operations approximately in balance. The Transportation Fund is projected to have a Fiscal Year 2017 ending balance of $147.1 million, after accounting for the Fiscal Year 2016 ending balance of $142.8 million. I am in general agreement with these estimates.
As I noted last month, the budget estimates rely on significant lapse savings that are currently targeted at $190.8 million. While that target is not at a historically high level, it follows successive fiscal years of significant cost cutting with each year's target becoming more challenging to achieve. Current General Fund projections have Fiscal Year 2017 total spending growth flat against last fiscal year. To realize no growth in actual year-over-year outlays is a considerable management challenge that will require the skillful efforts of all agencies and branches of government.
General Fund revenue estimates for Fiscal Year 2017 are consistent with a continuation of moderate economic growth. In fiscal year 2016, tax revenues fell more than half a billion dollars short of initial budget projections. Volatility in capital markets and slower than expected growth in workers' wages were major contributing factors to sluggish revenue growth in Fiscal Year 2016. I will be carefully monitoring economic data that impacts state revenue and will adjust my estimates accordingly in future letters.
Preliminary Connecticut payroll employment estimates show that the state added 300 jobs in August to a level of 1,690,800, seasonally adjusted. Over the last twelve months ending in August, employment in the state has grown by approximately 18,600 positions or 1,550 jobs per month. July?s originally released job gain of 1,700 was revised down sharply to a loss of 800.
Connecticut's unemployment rate was 5.6 percent in August; the national unemployment rate was 4.9 percent. The state's unemployment rate has continued to decline from a high of 9.5 percent in October 2010. There were 106,100 unemployed job seekers in Connecticut in August. A low of 36,500 unemployed workers was recorded in October of 2000. The number of unemployed workers hit a recessionary high of 177,200 in December of 2010.
Connecticut ranked twentieth nationally in income growth for the second quarter of 2016 based on personal income statistics released by the Bureau of Economic Analysis on September 28th. The state's personal income was growing at an annualized 4.5 percent rate in the second quarter of the year. This growth rate exceeds that of the prior year.
According to CT Realtors, Connecticut single-family residential home sales increased 9.1 percent in August 2016 from the same month a year earlier. The median sale price also rose by 5 percent to $269,000. This marks a reversal of recent trend of consistent monthly declines in home prices. Townhouse and Condominium sales increased 14.1 percent from last August, however prices fell 3.5 percent to a median price of $167,500.
A September 22nd report from the Commerce Department showed U.S. sales at retail stores, online and at restaurants fell 0.3 percent in August. Sales were also slow in July rising just 0.1 percent, which was a small upward revision from an initial flat reading. Excluding both autos and gasoline, sales were down 0.1 percent in August. The report indicated that sales for non-store retailers, a category that includes online merchants such as Amazon, fell 0.3 percent in August. That was the largest one-month decline since January 2015.
The Bureau of Economic Analysis reported that GDP in the second quarter of 2016 grew at a 1.4 percent annual rate. In the first quarter GDP grew by 0.8 percent. Before-tax corporate earnings fell 4.9 percent in the second quarter from a year earlier, the fifth consecutive decline and the worst streak since the end of the recession in mid-2009. The profit slump softens the outlook for already-weak business investment and also poses a risk to continued strength in hiring.
I also issue a Comprehensive Annual Financial Report (CAFR) as an accounting
supplement to the budgetary report. The CAFR includes financial statements for
all state funds and component units prepared in accordance with Generally
Accepted Accounting Principles (GAAP). From a balance sheet perspective, the
GAAP shortfall or unreserved fund balance in the General Fund was $793.2 million
as of June 30, 2015. I will be releasing the 2016 CAFR early in 2017.
To view the data in Excel format, click here:
General Fund: A-D Transportation Fund: E-H
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