Prudent fiscal reforms, including a volatility cap, enacted in the 2017 bipartisan budget are paying dividends for Connecticut.
This past week, a $60 million payment was made to the state employee pension fund due to the state exceeding the 15% volatility cap.
Under the legislation that implemented the volatility cap, amounts over $3.19 billion in the Rainy Day Fund must be deposited in the pension fund.
While $60 million is small change compared to the state's multi-billion dollar unfunded pension liability, this early payment is expected to save Connecticut taxpayers nearly $5 million annually over the next 25 years.
Gov. Ned Lamont and a bipartisan group of lawmakers released statements celebrating the news and the impact it will have on the state.
Several pointed out that it demonstrates that Connecticut is getting its fiscal house in order and could result in better interest rates on future borrowing.
Projected Budget Deficits
However, the state still faces significant projected deficits in the current fiscal year, which are projected to grow in the coming years.
The current budget deficit is projected north of $2 billion, which prompted the governor to release a deficit mitigation plan this week.
The plan consists of various spending cuts and tax increases, including making permanent the perennially extended corporate surcharge tax that was supposed to sunset in the near future.
Lawmakers also floated the idea of tapping the Rainy Day Fund to address the projected deficits.
The volatility cap was one of the key bipartisan fiscal reforms passed during the 2017 legislative session.
Legislative leaders, like the chairs of the Finance, Revenue, and Bonding Committee, insisted the cap be part of the bipartisan budget, and have since deflected numerous efforts to undermine the cap.
Had the cap not been put in place, there is no question lawmakers would have increased state spending rather than address our existing debts.
More fiscal restraint will be critical in the effort to rebuild Connecticut.