State Operating At $600M Deficit, But Surging Revenues Clear the Deck … For This YearJune 21, 2018
The state will operate with a $600-million deficit in fiscal year 2018, the state's budget office reported, but with surging revenues the volatility cap transfer will clear the deck, at least for now.
Connecticut will carry nearly $1 billion into its rainy day fund into fiscal year (FY) 2019, according to new projections from the governor’s budget office released Wednesday. But Connecticut’s out-years from its latest budget, passed in May 2018, suggest lots of red in the years ahead.
Office of Policy and Management (OPM) Secretary Benjamin Barnes, who serves Gov. Dan Malloy (D-Conn.), wrote to Comptroller Kevin Lembo (D-Conn.) on Wednesday that Connecticut’s operating deficit for FY 2018 will be $600 million. That’s $116 million better than last month’s projection, due to “agency spending restraint,” Barnes wrote.
But even after clearing the $600-million deficit, the state will finish with nearly $1 billion in its rainy day fund, due primarily to surging revenues that have led to a large volatility cap transfer of $1.35 billion to Connecticut’s coffers. (For a good read on the volatility cap, see here, from The CT Mirror‘s Keith Phaneuf.)
The rainy day fund, known formally as the Budget Reserve Fund (BRF), will still be less than it should be, though, according to Barnes:
In accordance with existing law, the projected deficit will be extinguished via transfer from the Budget Reserve Fund as part of the process of closing out the fiscal year. The current balance in the Budget Reserve Fund (BRF) is $212.9 million. Net of transfers required to balance the FY 2018 budget and use of resources per Public Act 18-81, we estimate that the BRF will rise to $945.8 million at year-end, or about 5.0% of General Fund appropriations. . While making a sizable deposit is a welcome development in rebuilding the rainy day fund, the BRF balance will still fall short of the 15% target adopted by the legislature in Public Act 15-244.
What’s more, the out-year budgets don’t look good for Connecticut. The first four fiscal years a new governor is responsible for will carry total deficits of $11.15 billion, according to the Office of Fiscal Analysis (OFA).
- FY 2020 (October 2019-September 2020): $1.9608 billion projected deficit
- FY 2021 (October 2020-September 2021): $2.5009 billion projected deficit
- FY 2022 (October 2021-September 2022): $3.1167 billion projected deficit
- FY 2023 (October 2022-September 2023): $3.5699 billion projected deficit
If history is any indicator, the projected deficits will only get worse as the years go by. This will be the immediate, major challenge for the next governor.
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