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State Budget Surplus Continues To Grow

by Christine Stuart | Jan 2, 2014 1:43pm
(29) Comments | Commenting has expired
Posted to: State Budget

Just two months ago the state was expected to end the fiscal year with an $11.2 million surplus, but according to state Comptroller Kevin Lembo that surplus is up to $273.3 million.

In his monthly letter to Gov. Dannel P. Malloy, Lembo said the $273.3 million surplus is $137.4 million more than last month’s estimate.

Most of the increase is related to the additional revenue the state received from its tax amnesty program. The state had budgeted $35 million for the program, but it received more than $175 million from delinquent taxpayers looking to settle their debts.

But the good news didn’t end there.

“While the largest portion of this excess revenue is the result of the tax amnesty program, there are also generally positive trends developing in overall state revenue,” Lembo wrote. “Improvements in the state’s employment numbers, continued strength in the housing market, and strong equity markets are contributing to a more favorable revenue outlook as we enter 2014.”

Revenue is expected to exceed initial budget projections by about $201.7 million, while spending is close to initial budget targets, Lembo said.

“This growing surplus is a great sign for Connecticut’s economic recovery,” Lembo said. “However, in the next biennium — and beyond — we face new and greater challenges that require action today.”

Lembo noted that while the state’s outlook for the current fiscal year has been improving month after month, more than $300 million from last year is included in this year’s budget.

Nonpartisan fiscal analysts and Malloy’s own budget office predicted that the budget will be back to running deficits of $1.1 billion to $1.4 billion over the next three years if the state legislature does nothing. Addressing those deficits will be even more difficult if the state doesn’t put the surplus in the rainy day fund.

Because of the state’s continued slow recovery — and many future long-term liabilities — Lembo said it is imperative to re-build the state’s rainy day fund and prepare for future obligations and uncertainties.

“Both OFA (Office of Fiscal Analysis) and OPM (Office of Policy and Management) have estimated budget shortfalls beginning in Fiscal Year 2016 if current policies and trends remain unchanged,” Lembo said. “Therefore, it is essential to the state’s long-term fiscal stability that sufficient reserves be established as soon as possible. Too often in the past, opportunities to build reserves have been missed as other perceived budget priorities were pursued.”

The reserve balance at the end of fiscal year 2013 was $270.7 million, which is 1.6 percent of planned spending. Lembo has called for a reserve level of 15 percent of spending, but the legislature would need to change the law in order to make that happen. Currently, the rainy day fund is capped at 10 percent of spending.

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(29) Comments

posted by: Art Vandelay | January 2, 2014  4:10pm

I do not believe ANY numbers regarding a surplus or deficit relating to Malloy or anyone else in his Administration.  He’s just trying to make himself look good for November.

posted by: StanMuzyk | January 2, 2014  8:47pm

“A careless with truth state budget surplus” apears to be a Gov. Dannel Malloy administration press release that is only believable by people who vote for a living to get their freebies from taxes paid by our minority working taxpayers who lose out at state elections because they are outnumbered by the voters they support. The truth projected is that Connecticut will end the fiscal year with a $1.1 billion dollar deficit—which is believable—based on the Malloy administration’s continual
deficit spending.  As long as we have more people who vote for a living—Malloy knows he can win the election by being fiscally irresponsible.  We are not in good shape—based on the politically devised shape we are in.

posted by: ocoandasoc | January 2, 2014  9:14pm

What CT has done is akin to a consumer taking a $10,000 cash advance on their credit cards, putting it in a savings account, and then bragging about how much money they’ve saved. It would be funny if it weren’t so tragic.

posted by: dano860 | January 2, 2014  10:50pm

Spot on Art. Unfortunately he’s doing it!

posted by: wil22 | January 3, 2014  3:35am

When you police yourself you get the misleading information listed here. Just yesterday an article about less revenue from slots and cigarettes. Which is it less or more revenue?

posted by: wil22 | January 3, 2014  3:58am

State Struggling With Lower Slots, Tobacco Revenues
More Casinos in New York and Massachusetts On Horizon, From the Courant. Which is it?surplus or deficit?

posted by: jim black | January 3, 2014  10:18am

Exactly what I thought when I saw the headline. Cook the books for November. Of course after that it will magically disappear. Then if the state isn’t smart enough to give Malloy the boot he will see it as a license to top his largest tax increase in Connecticut history. Hold onto your wallets and get the moving vans booked. Good luck selling any property though. Nobody wants to come here and most of the people paying taxes want out. I know for me that if he gets re-elected it will be the last straw.

posted by: Christine Stuart | January 3, 2014  11:26am

Christine Stuart

Wil22,
These estimates are based on what was projected in the budget. Just because there’s an overall decline in a revenue stream doesn’t mean it will bring the state into deficit. It depends on if they predicted correctly the amount of money they will receive comes to fruition. There are 25 tax categories, but they have to be off by a large amount in order to get this wrong.
Best
Christine

posted by: happy state worker | January 3, 2014  11:40am

I truly enjoy reading the nonsensical drivel of the low information right wing loonies who visit this site. Perfect for examples of knowing just enough to make fools of themselves.  1) the Comptroller is an elected Constitutional Officer he does not work or report to the Governor. 2) This surplus relates to the current fiscal year and is measured as revenue and expenes versus budgeted. 3) The fantasy deficits are based on future predictions not facts. As with all future Current Services budgets the pretend that every State pisition will be filled, every requested line item will bhai e approp’ed etc. The lack of knowledge from ths posters is comical at best.

posted by: LongJohn47 | January 3, 2014  11:52am

Lembo is not part of the administration.  He is elected independently and operates that way.  Go back to earlier articles where he was more pessimistic than Malloy’s people.  I don’t remember you guys complaining then.

posted by: robn | January 3, 2014  3:12pm

Annual deficit/surplus doesn’t have a lot to do with CT’s long term total debt (last time I heard it was $46K per person). A past commenter tried to defuse this worry by noting that CT is one of the few states without county government (carrying a portion of the per capita debt off the books of the states) and therefore CT looks worse on paper. Whether or not this is true, note that Detroit’s debt burden is about $27K per person; far less than our state per capita debt.

posted by: LongJohn47 | January 3, 2014  4:31pm

robn—it is true, and it does matter.  What’s more important is that CT, unlike Detroit, has a robust tax base that can afford to make debt payments, so the market is willing to lend us money at low rates. 

And of course those debt payments are part of the annual budget, so they do impact the amount of surplus or deficit.

posted by: dano860 | January 3, 2014  5:34pm

H.S.W.,
You are correct. He, thankfully, is an elected official.
Right wing or left wing it doesn’t matter. With the knowledge that you supply I feel much better.
The comment that clears it all up for me is #3. It’s all pretend, not fact. Great! I wish I could run my household that way.
When they look at sudden influxes of cash from back taxes or death taxes as revenue streams they are definitely pretending.
There is little doubt that the comedy will continue, right through the next legislative session and election.
LET THE FUN BEGIN!

posted by: StanMuzyk | January 3, 2014  6:32pm

Robn: With Detroit going into Chapter 9 Bankruptcy on July 13, 2013 with the largest municipal bankruptcy in U. S. history estimated at $18 to 20 billion dollars—“Detroit’s 27k per person tax burden compared to Connecticut’s 46K tax per person burden—makes this state appear to be is worst shape than our state financial think tank wants to tell us.”  Perhaps we are being blind-folded to hide the true state of Connecticut’s financial demise—which appears to is flooded with red ink—robbing Peter to pay Paul - “not unlike a Ponzi scheme.”

posted by: happy state worker | January 3, 2014  9:35pm

Long term debt well lets put that in perspective. How much is tied to revenue bonds versus general obligation. The SEBAC agreement dramatically changed the pension obligation and the post retirement benefits with the new 3 percent contribution/state employee income tax. Also people tr ying to imply that the sum of all payments made for the debt is the present value of the obligation is a faulty analysis if not an outright lie but what can be expected of right wing simpletons.

posted by: robn | January 4, 2014  9:20am

HSW,

I hope your disdain for the taxpayer is held by a minority of state workers. Off topic but a “dramatic” change to pensions would be to replace defined benefits with defined contributions (this is fair and truthful).

It’s not overly simplistic or a lie to compare our cumulative debt to others. Sure it depends upon the productivity of the debt (is ours constructive or not, will it lead to growth or just pile on more debt?) but the degree to which CT is in debt relative to others is highly disturbing. PS. I’m not a right winger; I’m an FDR Democrat.

LJ47,
A lot of money moves through CT but for the average person (non hedge funder) that doesn’t make its tax base robust relative to our spending. CT residents have to work longer than in any other state to pay their taxes and have the highest per capita state/local tax burden in the US. This path is stagnating our state.

posted by: robn | January 4, 2014  9:34am

HSW

BTW if you’ve got a lucid breakdown CTs percentage of long term debt attributed to GO vs Rev Bonds I’d love to see it.

posted by: LongJohn47 | January 4, 2014  11:19am

Stan—CT is not Detroit (or Greece, or any other third world place), so comparing their financial situation and ours is like comparing the budgets of the Bridgeport Bluefish baseball team with the Yankees or Red Sox (pick your favorite). 

We can afford it, they can’t.  It’s that simple.

posted by: StanMuzyk | January 4, 2014  1:38pm

LongJohn47:  “We can afford it” is the motto that Gov. Dannel P. Malloy lives by.  He never says NO to spending money we do not have in our state budget.

posted by: LongJohn47 | January 4, 2014  2:23pm

robn—NY and NJ have higher state/local tax burdens

BTW, our businesses pay much lower taxes than many other states.  see table 6 of this Ernst & Young report

posted by: happy state worker | January 4, 2014  2:44pm

I have a healthy disdain for experts with no obvious expertise and likely I pay more in State and Federal income taxes then these no nothing experts. As for definef bhai enefit versus pension show me the proof, because you can’t except to throw meaningless stories about.its been my experience that usually those with the biggest mouths and the most certain of their positions actually the ones with the least knowledge and insights. Case in point is the idiotic references to Detroit the whole problem revolves around the collapse of the Detroit auto industry and the halfing of the population base not the less than 35K a year average pension.

posted by: lkulmann | January 4, 2014  7:06pm

I’m sitting here still mildly annoyed by the way State employees treat the public, specifically social services. The article on this website about the woman who was verbally assaulted by a ‘lawmaker’ really upset me, deeply. I am able to relate to that woman who was made to feel like a freeloader. More importantly I wish I could figure out why they’re so mad and hating the public. I mean holding out on services for the poor and disadvantaged is the lowest form of mean. What kind of Social Worker would do that? I can understand crooked politicians and all that nonsense and honestly I could care less, but skimming off food stamps? Denying healthcare? Denying medications? Denying diapers for incontinent teenagers and adults? This is beyond mean. Why would Social Workers hoard federal money meant for the disabled? It finally clicked, finally. These workers are always counting the days, months, years of public service and retirement money and pensions and funding pensions… salivating about their retirement income and practically tasting the money they’ll be getting at retirement. They skim off the top because they are afraid they are going to get burned by administration come pension-time. You can’t complain in this State for fear of retaliation. The unions and the feds are bought and paid for so they’re trapped. That doesn’t justify the behavior but it certainly explains the insanity within this State government.  It all adds up. Problem resolved. I can only hope you all go straight to hell~ denying the disabled diapers and food stamps… ugh

posted by: ASTANVET | January 5, 2014  10:04am

Many of the defenders of the State’s overspending say “they can’t afford it, we can”, or “we have a more robust tax base” - it is precisely that kind of arrogance that leads to disaster.

posted by: LongJohn47 | January 6, 2014  12:37pm

robn—here’s a response to your question about bonds from Steven Kitowitz at OPM

“approximately ¾ of outstanding debt is general obligation debt which is issued for anything from building and renovating state buildings, to capital grants to nonprofit providers and to business assistance programs. 

“The majority of revenue/special tax debt is from two programs; the special tax obligation bond program for transportation projects funded from the taxes and fees designated to the special transportation fund and revenue bonds for the clean water fund which are repaid from the loan repayments made by municipalities and wastewater treatment authorities. 

“There is also some contingent liability debt where the state is responsible for replenishment of capital reserves to a predetermined level in the event that an entity need to tap a reserve account to pay debt service.  This debt is primarily issued by the state created quasi-public agencies.”

posted by: robn | January 6, 2014  4:20pm

LJ47

If GO bonds comprise 3/4 of outstanding debt, HSW can’t refer to debt worry as a lie (especially since the other 1/4, revenue bonds, is never a sure thing).

HSW

Defined benefits are supported by an often politically tainted projection of how an investment fund MIGHT do; unfairly putting all future risk on taxpayers. Defined contributions give investment money to workers who can invest it for their retirement as they please; future risk is born by the recipient which is fair.

Other salient points:

1) “Detroit” comparisons; income vs debt

Detroit per capita income $15,000
Detroit per capita debt $27,000
Income is 0.55% of debt

CT per capita income 2011 $35,000
CT per capita debt $46,000
Income is 0.75% of debt

CT is better but not what I would call good.

2) “Robust” “we can afford it”

Our population and economy haven’t significantly grown for many many years. This is a sign of stagnation. Taxpayers will pay what they’re willing to pay; those unwilling will flee and this is why we’re stagnated (and indebted) while other parts of the country are growing.

posted by: LongJohn47 | January 8, 2014  3:29pm

Robn - could you please provide your source for the Detroit numbers?  The Dec 2013 BEA report shows the Detroit metro region per capita income at $42.2k http://www.bea.gov/scb/pdf/2013/12 December/1213_lapi-tables.pdf Where do you get your numbers?

But more to the point, the market is willing to lend CT money at rates vastly more favorable than Detroit, so the market’s analysis of our financial situation is that we can afford it.

Finally, we hear a lot about people “fleeing” CT because of taxes, but it’s simply not true.  Check out this graphic on internal migration in the U.S.  http://vizynary.com/2013/11/18/restless-america-state-to-state-migration-in-2012/

The most recent data shows that we have three other states with significant population exchanges—Florida, Massachusetts, and New York.  The net outflow to Florida in 2012 was about 2400 people, hardly evidence of a massive relocation trend.  We also lost just under 2k to Massachusetts, certainly not a low cost/low tax state.

But the kicker is New York, from whom we imported 8,700 people, more than offsetting the outflow to FL and MA.  My guess is that these are mostly young couples with children who look to CT’s superior schools, towns, lifestyle, and lower taxes and are happy to come here to raise their families.

Finally, back to Florida for a moment.  About 6600 people relocated from there to here in 2012.  Who were they?  CT also has a net inflow of women over 80, so I’m guessing these are women who left for Florida with their now-deceased husbands in their 60’s-70’s and are returning to be near family (and bringing their estates back with them).

posted by: robn | January 8, 2014  4:04pm

LJ47,

Census data here


I’m interested in the interactive but for some reason I can’t get the page to load. My statement about people fleeing CT is based upon this

posted by: LongJohn47 | January 8, 2014  7:20pm

robn - thanks for the links.  Let’s look at the census data for Detroit vs CT

Bachelor degree or higher—12% vs. 36%
Median HH income—$27k vs $69.4k
Retail sales per capita—$3.6k vs. $15k

In short, comparing Detroit to CT makes no economic sense.

Additionally, it makes no political sense.  Detroit, as a city, exists solely at the whim of the state.  This was shown recently when the state disenfranchised the local population and replaced an elected mayor with a financial overseer who is empowered to make drastic financial decisions.  Also, Detroit can only levy taxes that the state allows them, so they’re limited in what they can do.

CT, on the other hand, is a sovereign state, with whatever taxing power it wishes to give itself.  This comes in handy when you need to make debt payments.

So CT has tremendously more economic power per capita than Detroit, and it has ultimate and almost unfettered control over how it wants to tax and spend.

And the market recognizes the difference and allows us to borrow as much as we want at preferential rates.

So, we can afford it.

posted by: robn | January 8, 2014  9:34pm

LJ47,

The similar debt:income ratios I quoted were apples to apples using the figures I could find : per capita income to per capita debt; those ratios should still be valid per household.

To address “we can afford it”; the purpose of a state government is to further the welfare of its citizens; not to sustain itself. If the state is stagnating economically due to excessive regulation and taxation while other states are growing, then our state government isn’t succeeding in its mission.