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Budget Analysts Predict Increase In Revenue Over 3 Years

by Christine Stuart | Jan 16, 2014 5:30am
(23) Comments | Commenting has expired
Posted to: State Budget, Taxes, State Capitol

CTNJ file photo

Capitol ceiling

Democratic Gov. Dannel P. Malloy got some good news Wednesday from budget analysts who predicted that revenue would increase by more than $500 million over the next three years.

The legislature’s nonpartisan Office of Fiscal Analysis and Malloy’s budget office agreed Wednesday that revenue would increase about $365 million in 2014 and $153 million in 2015. If the revenue growth is realized, it’s enough money to cut the projected deficit in fiscal year 2016 in half.

The new consensus revenue report increases the $273 million budget surplus state Comptroller Kevin Lembo projected earlier this month to nearly $500 million. However, it doesn’t completely erase future deficits, which have been estimated by nonpartisan fiscal analysts at $1.1 to $1.4 billion over the next three years.

Still, the Malloy administration pointed to the report Wednesday as a sign that his administration was on the right path and the economy is improving.

“To go from a record-setting $3.6 billion deficit to a surplus of nearly $500 million in three years is an extraordinary achievement, and speaks to the commitment of this administration to hold the line on spending, while at the same time making smart investments in public education and job creation,” Malloy said in a statement. “There’s much work to do, but make no mistake: our economy is improving, private sector jobs are growing at the strongest pace in decades, and we are reducing the state’s overall indebtedness. And we are accomplishing all of this at the same time we are putting money away in the rainy day fund.”

Sen. Minority Leader John McKinney, who is also seeking the Republican nomination for governor, was cautiously optimistic about the numbers and quick to point out the state will still be running a deficit in 2016, even with the increased revenue.

“The surplus figures are positive news, but Governor Malloy cannot ignore the $2 billion deficit that awaits Connecticut taxpayers in FY16 and FY17 as he prepares his budget proposal,” McKinney said. “His use of one-time revenues, accounting gimmicks, and borrowing for operating expenses to balance the current budget leaves the state with few good options to close our future deficits.”

Some at the Capitol believe the current state budget surplus is a mirage because it was build with one-time revenues and other budget gimmicks.

Most of this year’s projected surplus comes from the additional revenue the state received from its tax amnesty program. The state had budgeted revenue of $35 million for the program, but it received more than $175 million from delinquent taxpayers looking to settle their debts.

However, there’s also data in the new report that shows income and sales taxes are expected to increase over the next three years.

The assessment of the state’s revenue is one of the last fiscal reports Malloy receives before finishing his February budget proposal and sending it to the legislature. Consensus revenue reports are issued every January, April, and November.

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(23) Comments

posted by: jim black | January 16, 2014  9:13am

This will all vaporize if Malloy is re-elected. Then he will want to best his largest tax increase in Conn history soon after to fund vote buying for 2018.

posted by: JamesBronsdon | January 16, 2014  9:51am

I too will have a surplus when I sell my house and cars, take cash advances on my credit cards, and pawn my wife’s jewelry, and put all the proceeds in the bank. Of course, nowhere to live, nowhere to go, and my wife is really po’ed.

posted by: dano860 | January 16, 2014  12:17pm

I plan on winning enough from ‘instant loser’ lottery scratch tickets to pay my mortgage and pay my taxes. That sounds like a fool proof plan now doesn’t it?
Maybe I should do like the State and run out and get a big loan based on this plan…think the bank will buy it?
Windfalls are not earnings and certainly don’t point to an improving economy.

posted by: StanMuzyk | January 16, 2014  12:31pm

Who in their right mind would take any press releases from the Gov. Malloy administration seriously?  This release is even “hard-to-swallow for die-hard Democrats.”

posted by: Chien DeBerger | January 16, 2014  12:56pm

Can I ask if this includes the unfunded pensions, bonds and other borrowed funds to implement their plan?

posted by: Christine Stuart | January 16, 2014  1:03pm

Christine Stuart

Chien,

So this is nonpartisan legislative analysts and OPM coming up with a consensus on revenues. There’s no consensus on spending. The reason they came up with the report was because in 2008 or 2009 former Gov. M. Jodi Rell closed a smaller deficit than the one that actually existed because the revenue estimates were off by a lot. This only counts the money coming into the state. It does not account for spending or long term liabilities.

Christine

posted by: Joebigjoe | January 16, 2014  1:24pm

I read elsewhere 8.8 Billion from taxes from individuals in the state. It makes me sick.

posted by: JamesBronsdon | January 16, 2014  1:28pm

Christine, not challenging because you’re there every day and know, but want to understand: how are these analysts non-partisan? Assume they’re hired by the party in charge, which for many many years has been the D party.  But maybe that’s a wrong assumption.

posted by: Christine Stuart | January 16, 2014  1:48pm

Christine Stuart

OFA reports to the legislature and is hired by Legislative Management. The Dems do control the legislature, but OFA reports and works with both the Dems and the Republicans equally. They sometimes disagree with OPM with is an executive branch agency. For instance, there’s this story from November. Anyway the nonpartisan nature of the agency is based in its mission. Obviously there are going to be times of disagreement, but Republicans who ask OFA for information all the time don’t believe it’s a partisan agency.

posted by: Commuter | January 16, 2014  1:51pm

In plain english this means that the state is projected to be in a position to meet all of its current obligations, including pension payments, debt service including the debt used to capitalize the transition to GAAP, and operating costs, and have a half a billion dollars left over.

That money should (and Malloy and his budget chief have said repeatedly will) be used to re-fund the rainy day fund, restructure and pay down the state’s bonded debt and pension obligations, and improve the tax code (meaning at least in part tax cuts) as soon as possible.

As for the projected deficit, if it ever materializes at all, at this point even the worst case scenario places the spending cuts that would be necessary within the Governor’s rescission authority (or very nearly).

It’s a $4.2 billion turnaround in the state’s operating condition, accomplished in 3 years in an economy that has been much more sluggish than anyone anticipated.

That’s phenomenal, made more so by the fact that Malloy said this is what would happen when he took office.

posted by: Joebigjoe | January 16, 2014  1:51pm

My perspective from the private sector, as it happens here as well, is you had better be very locked in to your job before you give bad news. There are “politicians” in the private sector that will make news look good, but do that by spin and telling half the story. It’s called employment security.

posted by: StanMuzyk | January 16, 2014  5:01pm

Gov. Malloy is working 24/7 to facilitate promising releases of this nature—to tell voters what they want to hear “for self preservation, and hope for reelection.”  However, We can’t believe everything we are told by “by our political spin-doctors.”  We should take any three-year prediction from our governor with grain of salt.
He is plugging to be in office three years from now.

posted by: RogueReporterCT | January 17, 2014  2:42pm

RogueReporterCT

Effing brilliant artwork!

posted by: JamesBronsdon | January 17, 2014  3:52pm

Brilliant, yes, but also a melancholy reminder of better days, Rogue.

posted by: Connfusion | January 18, 2014  3:58am

In plain English, the state borrowed 900 million dollars to balance this budget in October. Let’s not forget 314 million dollars in 2009.  Over a billion in borrowing for operating expenses. What a way to run a government.

posted by: Christine Stuart | January 18, 2014  1:17pm

Christine Stuart

Also just to add some clarification OFA is not biased, which I guess is another way of saying nonpartisan.

posted by: StanMuzyk | January 18, 2014  8:20pm

@ChristineStuart: Good controversial subject
selection and review on your part—as it opens up “a can of worms” with a questionable prediction of increased state revenue—yet Gov. Malloy never mentions “increased state spending”—the nemesis of his Democratic administration—which always wipes out increased state revenue—and proceeds to deficit spending.

posted by: dano860 | January 19, 2014  12:35pm

The editorial headline from the Sunday Bulletin (aka Norwich Bulletin) reads “, A $500M ‘surplus’ isn’t worth cheering when you owe $44B.”
I think that pretty much says it all!

posted by: Commuter | January 20, 2014  1:37pm

While it would have been preferable to pay for it out of current income (because of weak revenue that wasn’t feasible) the borrowing to pay for the transition to GAAP amounts to a structured retirement of a ‘debt’ that was buried in the budget.

A $4.2 billion turnaround while revenues are under-performing forecasts is something that business leaders and the bond market are taking notice of.

With the state’s operating budget righted and on a clear and steady course, the capital markets and businesses can have confidence in what lies ahead. That in turn stabilizes the state’s revenue expectations and debt financing costs.

That is a virtuous cycle that over time means there will be an opportunity to strategically restructure and reduce taxes and restructure and retire the $44 billion in long-term obligations hanging over our heads.

Even if one were accept McKinney’s assertions, if we keep finding ways to keep moving forward on the course that Malloy has laid, our condition will continue to improve.

And let’s not let this pass without pointing out - again - that neither McKinney, Lauretti, Foley, nor Boughton have proposed any alternative plan, said what programs they would cut, or provided concrete facts and figures for anything. It’s all worn out right wing tropes and promises that our problems will all be solved if we just blame the right people.

posted by: Joebigjoe | January 20, 2014  2:26pm

Commuter interesting comments but look at this way.

It is much more difficult for a Republican to propose cuts because the main stream media rips them to shreds calling them names, calling them racists, and painting good family men and women as people that want other people to die in the streets without the govt services they need.

At the National level even Paul Ryan cut veterans benefits and has paid a price within his own party and unless this is part of some massive brilliant scheme he has will turn people away from him and the Republican Party.

The best approach is across the board cuts at a percentage rate the same for everyone.

However the first step is for everyone to agree that slowing the rate of growth of spending is not a cut unless in subsequent years you will be getting less than what you get now. That definition they use makes millions of Americans so mad. Treat it like a family budget when things get tight. Until that happens its all politics and spin and they should all be ashamed of themselves.

posted by: Commuter | January 21, 2014  4:32am

Joebigjoe (ignoring your almost-bigoted remarks), you’re getting close, I hope you don’t mind my saying so. There are a couple observations I will offer.

First, you imply that the current (national) economic regime is somehow fair to working men and women and small business people. It is not, it hasn’t been for a long time, and that is not an accident. An “across the board spending cut” hits average people disproportionately.

Second, you are conflating (or making equivalent) federal government spending and state government (or local, or corporate, or household) spending. They are fundamentally different, particularly for the US government.

In a sentence, the US federal government has an infinite amount of money (it needn’t tax nor borrow to spend), and can spend in deficit, while the other entities mentioned must balance their budgets and so on.

Tell me if I’ve misinterpreted what you are trying to say, but it isn’t the first time someone has said such things.

posted by: Joebigjoe | January 21, 2014  8:30am

Commuter there you go making my point by saying(ignoring your almost-bigoted remarks).

Across the board cuts would be the same for military, infrastructure and social services and you appear to have an issue with that.

Before the money started to flow to keep people dependent in the 60’s there were not people dying in the streets but every time it gets discussed the main stream media uses scare tactics and like you brings in race since cuts would supposedly seriously impact minorities. Last I read more white people get welfare than minorities in this country and welfare is just one of 80 programs.

Lets say we had a flat 2% cut. People cant live on a 2% cut? Then get a job. Cant get a job then vote for someone other than a Democrat as overwhelmingly people that are on government assistance of all races vote Dem.

As long as people are fighting for their pet issue and we dont have equal pain this will never get solved.

Your knowledge of economics is pretty weak my friend and also scary. An infinite amount of money???

You know something I just got my W-2 yesterday. I paid over 10000 dollars in CT state income tax this past year. I’m sick of it, but people like you just love these spending programs and game playing with the books on the state and federal level.

Distrust and disgust of both political parties around this country is reaching levels never seen. Time for you to switch sides and stop preaching at the altar of big government.

posted by: Commuter | January 21, 2014  6:52pm

Joebigjoe - Your recollection of what happened and why fifty years ago is a bit thin. Bear in mind that the country, until the oil embargo, was not suffering economically in the post war period. But that was a very different time in every respect, and the programs of the “Great Society” were in many cases poorly designed first attempts that needed to be and were reformed or eliminated.

Unfortunately, the experiment that began in earnest 30 years ago has been an abject and growing failure in terms of growing the middle class improved quality of life and security, for the vast majority of the population. This are measured, empirical facts.

Nobody is arguing that we attempt to return to a government-tuned economy. Our problems are much deeper. Most pointedly, there are approximately three people looking for a job for every available job. A healthy employment environment is more like 1:1.

Only the federal government can engage in the deficit spending necessary to increase employment (through infrastructure spending, which we desperately need) and unemployment payments to keep the mass of people from continuing to deteriorate financially, making them less productive.

The American economy is a consumer based economy. Until the mass of Americans have more money to spend, job creation will continue to sputter.

If you go and check out my statement as to the fact that the US government needn’t borrow nor tax in order to spend, you’ll find that to be true. It’s kind of what “fiat currency” means.

And, btw, I have probably forgotten more about economics and how the economy functions than you’ll ever know. But let’s leave the name calling aside from now on, OK?