Revenue Boost Helps Reduce Budget Deficit
HARTFORD, CT — The legislative and executive branches largely agree that Connecticut’s revenues are headed in the right direction—mostly due to an increase in personal income tax collections and the spending constraints put on the budget process by the bipartisan budget adopted in 2017.
Both parts of the personal income tax and sales taxes are expected to bring in more revenue than initially projected over the next three fiscal years.
“These new consensus revenue estimates reflect the strong recent growth we have seen in our economy and demonstrate that policy changes- such as the changes made to the pass-through entity tax- are working and helping taxpayers,” Office of Policy and Management Secretary Ben Barnes said Tuesday.
Earlier in the day, Barnes told the legislature’s Appropriations Committee that the state’s economy is doing very well.
“It is growing at a much faster pace than it has over the last eight years,” Barnes said.
He said the consensus revenue report reflects a “conservative view of a strengthening economy.”
The improvements in the revenue will reduce the strain on the next two-year budget by $600 million. Overall tax receipts will approach $16.44 billion this fiscal year.
That means the two-year deficit Gov.-elect Ned Lamont will inherit will improve from $4.4 billion to about $3.8 billion. It also means Gov. Dannel P. Malloy is leaving Lamont with $2.1 billion in the Rainy Day Fund.
“Governor-elect Lamont and the next General Assembly will have a difficult task ahead in balancing the budget and keeping it under the spending cap, but the economic performance we are experiencing has made the task more manageable,” Barnes said.
Senate Minority Leader Len Fasano, R-North Haven, was quick not to let the Malloy administration take too much credit for the improvements.
“These numbers represent clear evidence that our bipartisan, fiscally responsible, no tax hike budgets are bringing confidence to Connecticut and resulting in positive economic news,” Fasano said. “Republicans and Democrats worked together to avoid tax hikes and create gimmick-free budgets which included spending and bonding caps, and the result has been an increase in revenue and a decrease in the out-year deficit.”
Fasano, who will have at least five fewer members next year, is hoping that after last weeks election results that Democrats won’t forget their new found fiscal constraint.
“Today’s news is good news, but the new state legislature needs to be mindful that any retreat from this pattern of cooperation will set our state back decades,” Fasano said.
Rep. Toni Walker, D-New Haven, agreed the state hasn’t been in a position like this in a long time.
“We haven’t been in this circumstance for quite some time,” Walker said at an Appropriations Committee meeting.
Most of the last eight years has been covering for the “sins of our fathers,” Walker added.
Lamont said on the campaign trail that he didn’t want to use the Rainy Day Fund to help close the budget deficit, but he might find that promise is hard to keep.
Unable to layoff any state employees for the next two years, Lamont will have to find savings elsewhere in the budget and those cuts will be much deeper without using at least some of the Rainy Day Fund.
Lamont will need to present a two-year budget to lawmakers in early February. Lawmakers will counter with their own budget at the end of April.