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January 22, 2019

State budget surplus estimates rise again this month

HBJ Photo | Joe Cooper Connecticut state Capitol in Hartford.
By Eric Bedner | Journal Inquirer

The state’s general fund is expected to have an operating surplus of $461.9 million, which will help push budget reserves to nearly $2.3 billion by the end of the fiscal year, Office of Policy and Management Secretary-designate Melissa McCaw announced Friday.

The surplus is up $219.5 million from the projection last month due mainly to revised consensus revenue numbers released in early January.

McCaw is estimating that $648 million, combined with the projected surplus, will bring the budget reserve, or Rainy Day Fund, to a fiscal year-end balance of $2.295 billion.

The surplus increase is due in part to revised revenue numbers, showing $197 million more in revenue from last month, McCaw said.

The biggest change comes from the sales and use tax, up $79.3 million due to more collections and collections from online sales, thanks to a U.S. Supreme Court decision that requires companies to abide by states’ sales tax laws even if the company has no physical store in a state.

Connecticut’s withholding portion of the personal income tax also has been revised upward by $75 million, as have Indian gaming payments.

Gambling revenue is $25 million more than expected due to a smaller than anticipated impact of the MGM Springfield casino on Connecticut’s tribal casinos, McCaw said.

Inheritance and estate taxes also have performed better than expected, increasing $20 million from last month.

Estimated refunds of taxes, however, have been revised upward by $20 million due to greater than expected refund claims from income tax filers.

All other changes result in a net positive of $17.8 million.

While the projected estimates for personal income tax collections remain unchanged at this time, McCaw said, her office would continue to monitor payments that were due this month.

She noted that any changes due to the new federal tax policy would likely not be known until consensus numbers are released at the end of April.

While expenses will exceed budget plans by $12.9 million, the total is a decrease of $22.4 million from last month.

The Department of Correction is facing a projected $34 million shortfall, with personal services accounting for $13 million and an $18 million deficit related to the transition of medical services from the University of Connecticut Health Center to in-house and contracted care

The Department of Mental Health and Addiction Services and the Department of Children and Families are facing deficits of $5 million and $4.7 million, respectively.

McCaw’s office also is projecting $40 million in unspent expenses for adjudicated claims.

The Special Transportation Fund is expected to see an operating surplus of $69.6 million and end the fiscal year with a balance of $315.3 million.

Revenues in the fund have been revised upward by $3 million from last month, but tax revenues reflecting lower than expected oil prices decreased gas tax revenues by $17.5 million.

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