Bigger Budget Surplus Welcome, but Fleeting
According to the state comptroller, when the books finally close on fiscal year 2013, Connecticut will have a surplus of $312 million—a jump from the previous forecast of $236.6 million.
The increase is due in part to the fact that late last year, with Bush-era tax policy set to expire, many of the state’s wealthiest people made significant transfers of that wealth in order to avoid higher gift tax rates as of Jan. 1, 2013.
The comptroller is seeing a $428 million revenue windfall–more than double what officials had projected–from estate and gift taxes for the fiscal year that ended on June 30. Also coming in higher than projected are state income tax collections.
But the estate and gift taxes windfall is a one-time occurrence that’s not expected to happen again in the current fiscal year that began on July 1.
There are signs that both the national and state economies are beginning to recover. But these latest surplus numbers don’t necessarily relate to an economic turnaround upon which to base future budgeting. On the other side of the FY 13 ledger, sales and corporate taxes underperformed by $189.4 million and $51 million, respectively.
The comptroller also cautioned, “Despite the state’s improved financial outlook, the economic recovery proceeded at a slower-than-expected pace during Fiscal Year 2013.”
The state has recovered fewer than half of the jobs lost during the great recession—with the recovery period now up to 40 months. The state’s unemployment rate is 8.1%.
As the national economy improves (165,000 jobs gained in July; 188,000 in June), it’s important to make sure that Connecticut also participates. Getting the state into better fiscal shape will have a lot to do with restoring the kind of business confidence that leads to greater investments in the state and more robust job creation.
For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or firstname.lastname@example.org.
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