Pew: Revenues Lag Behind Expenses In Connecticut Over Long-Term
HARTFORD, CT — Gov.-elect Ned Lamont pegged Connecticut’s structural deficit at $75 billion.
A new analysis by Pew Charitable Trusts found Connecticut is one of 10 states — between fiscal years 2003 and 2017 — that has been unable to raise sufficient revenue to cover its expenses.
Revenue totaled 96.9 percent of expenses in Connecticut during that time period with deficits in 12 of the past 15 years.
Connecticut, according to Pew Charitable Trusts, is tied for fourth place with Hawaii for having one of the biggest gaps between revenue and expenses. The state with the largest gap is New Jersey, which has enough revenue to cover 91.3 percent of its expenses, followed by Illinois with 93.8 percent and Massachusetts with 96.1 percent.
The gap between revenues and expenses jeopardizes the state’s long-term fiscal flexibility.
A state whose annual income falls short generally turns to a mix of reserves, debt, and deferred payments on its obligations to get by, researchers for Pew wrote. Conversely, when a state’s annual income surpasses expenses, the surplus can be directed toward nonrecurring purposes, including paying down obligations or bolstering reserves — or new or expanded services that create recurring bills.
Connecticut has made progress in building up its Rainy Day Fund, which is expected to exceed $2 billion by the end of the 2019 fiscal year.
But Lamont has said he doesn’t want to use it to balance the budget.
He said he spent a lot of time over the course of the campaign talking about where he thinks they need to make changes in the budget in order to make those structural repairs.
“I spent a lot of time talking about health care and what we can do there. That’s a structural change that will have long term savings for the state is priority number one for me,” Lamont said Monday. “Stretching out pension payments over a period of time so we don’t have any cliffs.”
Pew found that states have made progress in rebuilding their rainy day funds after tapping them to plug budget gaps during the recession.
“Nationwide, state rainy day funds held a record amount of money at the end of fiscal year 2017, and at least 26 states’ savings exceeded pre-recession levels when measured as a share of operating costs,” according to Pew. “Still, only 18 states could cover a greater share of spending than they could heading into the 2007-09 downturn when considering their total balances, counting rainy day funds plus leftover general fund dollars. Estimates for fiscal 2018, though, were higher amid an unexpected tax revenue spike.”
Lamont is expected to announce the volunteers he has working on his first two-year budget in the coming days. He has yet to announce any hires, but he appointed two executives Monday to help with his talent search.
Lamont will be sworn in on Jan. 9, 2019 and his first budget is due to the General Assembly by Feb. 6, 2019.