Lembo to Malloy: $595M Deficit This Year; CT Has Recovered Only 81% of Pre-Recession JobsJuly 5, 2018
Comptroller Lembo's latest letter to Gov. Dan Malloy (D-Conn.) stresses two things: the state is spending more than it takes in, and the state has not recovered from the recession.
Comptroller Kevin Lembo’s (D-Conn.) latest letter to Gov. Dan Malloy (D-Conn.) finds that the state will finish the fiscal year $594.5 million in the red.
Comptroller Kevin Lembo today projected a Fiscal Year 2018 deficit of $594.5 million, which is lower than earlier recent projections due to a combination of lower agency spending and a net improvement in revenues.
However, due to a “one-time-windfall” in income tax collections – thanks in part to the GOP tax bill passed in December – the state will close its budget deficit at the end of the fiscal year and leave the budget reserve fund with nearly $1 billion.
A likely one-time windfall in estimated and final income tax collections, totaling $4.54 billion, means that approximately $1.39 billion of income tax revenue exceeds the state’s new volatility threshold. Lembo – a longtime proponent of the volatility measure – said that approximately $779.4 million will likely be transferred to the state’s Budget Reserve Fund (BRF), which would bring the BRF to a total of approximately $992.3 million (about 5.25 percent of the state’s General Fund budget). Lembo has long recommended that the BRF reach 15 percent to protect against a future downturn.
While $1 billion is a large number, it’s far less than what Lembo and other policymakers recommend be in the BRF, more commonly known as the Rainy Day Fund.
More ominous for the state, though, is Lembo’s estimate that Connecticut has only recovered 81 percent of the jobs it lost to the recession.
The private sector has now exceeded its pre-recessionary employment levels by 102.3 percent – however, mostly due to significant loss in government jobs, Connecticut has only recovered about 81 percent of its overall jobs lost to the recession. And while the private sector has recovered more than the number of jobs lost, Lembo said the wages attached to those jobs are weaker.
The recession did not happen on Malloy’s watch, but under his tenure the state has not come close to recovering from the economic downturn of 2007-2008.
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