Jan. 21--Connecticut could end the fiscal year with something it has not seen in a while: a budget surplus.
Ben Barnes, Gov. Dannel P. Malloy's budget chief, projects a $23.3 million operating surplus for the fiscal year that ends on June 30. The sum is small in the context of the $20 billion state budget. But lawmakers said they were nevertheless encouraged. "This year's numbers are positive news and point to our successful efforts to balance the [fiscal] 2017 budget," said House Majority Leader Matt Ritter, D-Hartford.
Barnes credits higher-than-anticipated corporate tax collections, among other things, for the boost.
Corporate tax collections are up by $80 million over previous estimates, Barnes said in a letter to state Comptroller Kevin Lembo. The state's bottom line was also bolstered by a recent $31.5 million legal settlement with the credit rating agency Moody's.
"Consistent with large corporations nationwide accruing record profits, the corporation tax here in Connecticut has generated revenue beyond what was estimated and that is welcome sign of a strengthening state economy and the performance of businesses large and small," said Rep. Jason Rojas, a Democrat from East Hartford and co-chairman of the legislature's finance, revenue and bonding committee. "Our business community needs the state to provide stability in our tax and regulatory policies and in turn we should expect that our business community will invest their profits in their employees to help grow wages and provide a greater sense of security for families and our state economy. We should view this news with cautious optimism and recognize that additional work and opportunity lies ahead."
The positive news was tempered by downward revision in two other tax categories. Barnes said he expects the revenue generated by the sales and use tax will dip by $30.4 million over forecasts because receipts continue to lag. And he said the withholding portion of the personal income tax has also been revised downward by $15 million.
And a bigger problem looms for the next fiscal year that starts on July 1 with a projected deficit of $1.4 billion. Malloy will unveil his new budget in early February that will provide a blueprint for erasing the deficit in the coming year.
"This is good news for Connecticut, but we still have much work to do to meet the state's ongoing budget challenges," said Rep. Toni E. Walker of New Haven, the co-chairwoman of the legislature's appropriations committee. "We have worked hard with the governor and the state's agencies to hold down expenditures, and this report shows we are making progress. We must continue, however, to look for more efficiencies in government while protecting the people of Connecticut who depend on vital services."
Sen. Kevin Witkos, the Deputy Republican Senate President Pro Tempore, called the surplus welcome news.
"At least we're starting off next year without having to make up for this year but if we don't make the structural changes to our budget, we'll be facing a never-ending Groundhog Day" of future deficits, Witkos said.
Pat O'Neil, spokesman for the House Republican caucus, said a small surplus in the current fiscal year won't wipe away the state's longterm financial troubles. The surplus is partly built on the settlement with Moody's, a one-time revenue enhancer. "We still have a very volatile revenue stream," he noted. "We are looking at huge deficits in the next two years and absent significant structural changes in the spending side, that won't change."
The latest numbers were released Tuesday as part of a monthly letter written by Barnes to the comptroller to provide an update of the state's fiscal fitness.
Courant Capitol Bureau Chief Christopher P. Keating contributed to this story.
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