Connecticut’s budget surplus continues to grow as Republicans continue to call for more tax cuts to push back on inflation.
According to the Office of Fiscal Analysis, Connecticut’s General Fund will have an operating surplus of more than $1 billion for fiscal year 2022, which comes to an end this week.
The surplus is being driven by income tax revenue related to stock market earnings, which have come in 37.6 percent higher than forecast in the budget and the pass- through entity tax on businesses, which is a whopping 58.3 percent higher.
All told, Connecticut’s General Fund will have a $1.04 billion surplus, while the state’s Special Transportation Fund has a $195 million surplus, driven largely by increased revenue from Connecticut’s tax on oil producers.
The increased earnings will result in a larger payoff of Connecticut’s unfunded pension obligations. According to OFA, Connecticut will be able to increase its anticipated payoff by another $50 million through the state’s statutory volatility adjustment, marking a $3.7 billion pay down of debt.
Republicans and gubernatorial hopeful Bob Stefanowski have been campaigning around the state to promote their Affordable Connecticut agenda, which includes a $1.2 billion tax cut to help ease the cost of inflation on Connecticut residents.
Gov. Ned Lamont and Democrats in the General Assembly passed a budget during the 2022 session that included $660 million in tax cuts through a child tax rebate, increased property tax credits, a motor vehicle property tax cap and reducing income taxes on retirees.
Lamont also suspended the state’s gasoline tax and has eliminated bus fares until December of 2022, but Republicans say it’s not enough to ease the inflationary pressure on residents.
Stefanowski has been calling on Lamont to suspend an anticipated 9 cent tax increase on diesel fuel set by statute to kick in on July 1.
Inflation has topped 8.6 percent in recent months, and energy prices have risen rapidly over the past year, only recently showing signs of letting up, with gasoline prices in Connecticut declining from its highest recorded average of $4.98 just a couple weeks ago to $4.86 per gallon, according to AAA.
With Wall Street experiencing a rough downturn as of late, increased interest rates and fears of a looming recession, Connecticut’s Rainy Day fund remains maxed out with over $3 billion to weather any future downturns in tax revenue.
The latest budget projections show an additional $108 million surplus over the last budget estimate. Further adjustments may occur when the Comptroller’s Office finalizes the numbers between September and December.