The Office of the State Comptroller has announced a fourth consecutive reduction in projected budget surpluses for Fiscal Year 2024, though the state is still expected to take in more than it spends next year.
The comptroller’s monthly analysis for December, released Friday, projected a General Fund surplus of $153.9 million and a Special Transportation Fund surplus of $208.4 million for Fiscal Year 2024. These projections are in line with those provided by the Office of Policy Management (OPM). Since September, these surplus projections have decreased from an initial $390.2 million surplus in September to $284.5 million in October and then a $212.1 million surplus in November’s financial report.
The General Fund projection has fallen from previous months’ estimates by about $57.1 million. The reductions, says the Comptroller’s Office, are largely accounted for by the joint OPM and Office of Fiscal Analysis consensus revenue forecast for November.
“Despite a reduction in the General Fund surplus projections, our state’s finances continue to show signs of strength,” said Comptroller Sean Scanlon in a statement, striking a positive tone. “Heading into 2024, we still have a Rainy Day Fund at $3.3 billion and our unemployment rate remains below the national average. These factors put our state in a position to weather potential economic headwinds.”
Connecticut has experienced a string of budget surpluses since the COVID-19 pandemic which have provided an opportunity for the state to pay down massive pension debts over the last few years.
Following a budget overhaul in 2017, Connecticut caps its deposits into the Rainy Day Fund at $3.3 billion, which has been met, and forces certain surplus funds to be used only for paying down those debts. Under state law, once the Rainy Day cap is met, any revenues from the state’s Volatility Fund (which is home to investment returns) must pay down pension debt from the State Employee Bargaining Agent Coalition (SEBAC) first, then teacher pensions up to a certain amount.
Utilizing these debt payments, the state has made $7.6 billion in payments since 2018, including $1.87 billion this year. Still, the state carries $39.1 billion in unpaid pension liability, split between state employees (close to $21 billion) and teachers ($17 billion).
Prioritizing debt payments has allowed the state to reduce annual payments on that debt by hundreds of millions of dollars. Because of these reductions, the Lamont administration maintains that this is the best use of surplus funds because the debt threatens the state’s economic growth.
Gov. Lamont did, however, sign into law a tax reduction last year, totaling $660 million in relief. In 2023, additional tax reductions lowered income tax rates for the first $10,000 for individuals and the first $20,000 for married couples.
Speaking to the media in October, Scanlon said he believes state leaders have found a balance between “meeting the immediate needs of people and addressing long-term problems that went unaddressed for decades.”
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