Budget Closes Ahead, But No Surplus

With the books on the 2010 fiscal year now closed, officials say the state of Connecticut ended up in slightly better fiscal shape than anticipated.
A gradually improving economy helped boost tax revenues and enabled the state to finish the year ahead of budget plan by about $450 million, according to the state comptroller and governor’s office.
That’s good news–but it’s not a “surplus” because the state budget was kept above water by using up the Rainy Day Fund, using about $1 billion in federal stimulus funds, and delaying payments to the state employee pension fund.
Those one-time infusions masked the fact that state spending actually overshot revenues by $844 million in a total budget of $18.6 billion, according to the state comptroller.
Still, because of the better results, the state will now have to borrow less–$646.6 million instead of the planned $1.3 billion, and interest costs will be shaved by $124 million.
General Fund tax revenues grew by about 1.7% for the year, which is significantly weaker that typical growth of around 5%, said the comptroller.
“We’re not in a surplus situation,” says CBIA Economist Pete Gioia. “We only had less of a deficit because of the slowly improving economy. There are some good indications in our economy for private-sector job growth in 2011, but we have a long way to go and we face even steeper deficits in the next two fiscal years.”
Voters are nervous about the state’s fiscal condition. By a 2-to-1 margin, Connecticut voters responding to a summer public opinion poll commissioned by CBIA said that state government should “cut spending and do better with the money [it] already has,” versus “find new ways to generate revenue.”
For more information, contact Gioia at 860.244.1945 or pete.gioia@cbia.com.