January 3, 2023
The Honorable Ned Lamont
Governor of the State of Connecticut
Dear Governor Lamont,
I write to provide you with financial statements for the General Fund and the Transportation Fund through November 30, 2022. The Office of the State Comptroller (OSC) is projecting the General Fund will end Fiscal Year 2023 with a $1 billion surplus and the Special Transportation Fund will end Fiscal Year 2023 with a $226.6 million surplus. OSC is in general agreement with OPM's General Fund and Special Transportation Fund projections. The following analysis of the financial statements furnished by the Office of Policy and Management (OPM) is provided pursuant to Connecticut General Statutes (CGS) Section 3-115.
The General Fund surplus is projected to be $1,018.0 billion which is an increase of $12.7 million from last month's projection. This month's estimate includes revisions consistent with the consensus revenue estimates provided by OPM and the Office of Fiscal Analysis (OFA) and the passage of HB 6001.
Projected FY23 revenue remains unchanged from last month's projection.
Projected FY23 expenditures were revised downwards by $12.7 million due to $14.8 million in increased lapses offset by $2.1 million in additional requirements. This is primarily due to several Personal Service accounts expected to lapse due to vacancies, partially offset by the impact of increased spending as a result of the November Special Session.
The Special Transportation Fund surplus is projected to be $226.6 million, a decrease of $90.2 million from last month's projection due to a $90.0 million reduction in revenue and $0.2 million in reduced lapses. Governor Lamont signed HB 6001 on November 29, 2022, which reduced Special Transportation Fund revenue by $90 million. HB 6001 extended through December 31, 2022, the suspension of the state's 25 cent-per-gallon excise tax on gasoline. Beginning January 1, 2023, the tax will be phased back in over a period of five months at five cents per month.
The statutory revenue volatility cap requires receipts above a certain level to be transferred to the Budget Reserve Fund (BRF). OSC is currently projecting approximately $2.87 billion would be available to reduce unfunded pension liability for the State Employee Retirement System (SERS) and the Teachers' Retirement System (TRS).
Areas of the U.S. economy have started to show signs of slowing down. Inflation remains elevated but may have started to moderate. The CPI came in at an annual rate of 7.1% in November, as Federal Reserve raised interest rates once again by 50 basis points to cool demand and bring prices down. Mortgage rates have been moderating over the past six weeks, declining significantly after hitting a 7.08% high last month, but are still double what they were a year. Job growth and the unemployment rate are relatively flat. The U.S. added 263,000 jobs in November and the unemployment rate remained at 3.7%. The number of unemployed people decreased by 48,000 and jobless claims decreased slightly. Connecticut added 6,200 jobs in November and the state unemployment rate decreased to 4.2%. However, recent weekly and continuing unemployment claims show the number of unemployed people growing and jobless claims ticking up in Connecticut. U.S. household debt is up as inflation and increasing interest rates make it more expensive to borrow. The U.S. labor and housing markets may be slowing down, but GDP and consumer spending remain resilient. U.S. GDP grew 3.2% in the third quarter and consumer spending increased 0.1% from last month. Consumer confidence increased in December, mostly due to lower gas prices.
My office also issues an Annual Comprehensive Financial Report as an accounting supplement to the budgetary report. This annual report 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 unassigned fund balance in the General Fund was a negative $660,749 as of June 30, 2021.
If you have any questions on this report, please do not hesitate to contact me.