State Budget Surplus Growing, Debt Receding, Say Officials

Positive economic trends are helping to increase a projected state budget surplus this fiscal year, while several reforms are reducing the state’s long-term debt, say officials.

According to the state comptroller, job growth, a healthier housing market and gains on Wall Street are among the reasons for the increase in the budget surplus. But the biggest reason, he said, is the state’s tax amnesty program that has yielded more than four times what was targeted.  

Meanwhile, the Office of Policy and Management reported this week that the state’s long-term debt has shrunk over the past three years by $11.6 billion, or 15%, mainly due to reforms of state employee healthcare benefits.

According to the governor’s office, the reforms included “a combination of factors, including increasing the state’s payment into pensions and the GAAP deficit, the creation of a new pension tier, and requiring state employees to contribute to their post-retirement health care.”

Post-reforms, the OPM says the state’s overall long-term debt is now $64.6 billion, down from $76.2 billion.  

Fiscal responsibility is one of the most critical factors in a state’s economic competitiveness. State policymakers should be encouraged to find more ways to reduce the state’s long-term debt and make state government more efficient, effective, and affordable for taxpayers.

Rainy Day Savings

Comptroller Kevin Lembo, in his monthly letter to the governor, again urged that any surplus funds—now pegged at $273.3 million–at the end of this fiscal year (June 30) be tucked away in the state’s Rainy Day Fund.

At the end of fiscal year 2013, the Rainy Day Fund stood at $270.7 million, representing 1.6% of planned state spending. The comptroller is recommending a 15% reserve, which is 5% more than what state law currently allows.

Lurking ahead in the next few fiscal years are projected deep state budget deficits. “It is essential to the state’s long-term fiscal stability that sufficient reserves be established as soon as possible,” said Lembo.  

Just as important, said Pete Gioia, CBIA vice president and economist, is for state government to continue leaning its operations to become as effective and efficient as possible.

“That will help create a better fiscal picture to potentially roll back recent tax increases and have funds for needed infrastructure improvements,” said Gioia.

 For more information, contact CBIA’s Bonnie Stewart (860.244.1925; bonnie.stewart@cbia.com; @CBIAbonnie).