Yesterday, State Comptroller Sean Scanlon announced the release of his year-end report for fiscal year 2024. The report found that the state’s General Fund ended the year with a surplus of $400,945,886 and that its Special Transportation Fund (STF) ended with a positive balance of $967,853,700.
“Fiscal Year 2024 marks another year of responsible budgeting, historic pension debt payments, and additional Rainy Day Fund savings,” said Scanlon in an accompanying release. “What we are doing is working, and Connecticut’s fiscal health is the strongest it’s been in decades as a result.”
Scanlon boasted that the state was able to put away its statutory maximum of 18% of next year’s General Fund appropriations into the Rainy Day Fund, the fund established in 2017 to help save for unanticipated expenses, that’s now sitting flush with about $4.1 billion in reserve. This represents a 3% increase in Rainy Day Fund allocation from last fiscal year, bolstered by a $1.32 billion transfer of revenue in accordance with the revenue volatility cap that was implemented in 2018.
As the report outlines, revenue captured by the volatility cap was actually over what could be statutorily held in the Rainy Day Fund, leading to Treasurer Erick Russell depositing $608.2 million in excess revenue to pay down both the State’s Employee Retirement Fund (SERF) and Teachers’ Retirement System (TRS). $335 million went to SERF and the remaining $273.2 million went to TRS. Scanlon also reported that an additional $324.9 million in excess volatility revenue is expected to be transferred to the two funds after completion of the fiscal year’s audit.
“Achieving and surpassing the 18% threshold represents an important benchmark for Connecticut,” wrote Scanlon in his report. “Due to fiscal discipline and hard work, our state is in a much stronger position to provide critical services to those in need and to weather any future downturns in the economy.”
Scanlon’s report went on to outline the final budget numbers versus their preliminary expectations, as well as the year’s leading expenditures. The report stated that initial budget projections for the General Fund concluded that there would be a $399.7 million surplus. Those projections were subsequently reduced as a result of, “higher than budgeted spending projections, especially related to Medicaid and a change in the accounting treatment of certain state employee fringe benefits.”
Ultimately, the surplus ended up exceeding initial projections by $1.2 million, leaving a surplus of approximately $400.9 million, as a result of higher-than-anticipated revenues, and despite the fact that the state spent 2.6% more ($580.5 million) in fiscal year 2024 than it did in 2023. Despite the final budgetary revenues coming ahead of their projections, total revenue for fiscal year 2024 still decreased by $106.9 million (0.5%) in from fiscal year 2023.
“While revenues were budgeted to decline further, realized revenues exceeded the budget plan by $210.8 million,” read the report. “Consistent with a strong labor market and wage growth throughout the year, the withholding portion of the Personal Income Tax performed well, coming in above its budget target and growing by $349.3 million or 4.2%.[sic]”
The report highlighted Medicaid as the single largest line item on 2024’s budget, growing by $454.3 million over fiscal year’s 2023 budget, due to the end of COVID-era federal funding. Debt-service payments also increased by $194.8 million for the payment of General Obligation and UConn related bonds. It attributed these heightened expenditures primarily to the payment of the early retirement of the state’s General Obligation GAAP Bonds using $221.7 million of 2023 surplus funds, as well as an additional $103.1 million spent in the funding of several education programs.
In terms of largest-expenditure reductions, the report outlined a reduction in COVID-related expenditures such as the state’s Premium Pay Program (-$110.1 million) and Early Childcare Provider Stabilization Payments (-$69.9 million). The biggest saver listed by far, however, was the state’s controversial Medicare Advantage Prescription Drug plan, which, in tandem with the restructuring of fringe benefits for Higher Education employees, saved the state $133.6 million. It also noted that the transfer of several municipal grant programs from the state’s General Fund to its Municipal Revenue Sharing Fund took $574.5 million in General Fund expenditures off the books.
Revenues in the state’s STF, used for the development and maintenance of transport-related infrastructure, fared significantly higher than last year’s coming in at $341.2 million, 16.5% higher than fiscal year 2023’s revenues, and 2.5% higher than this year’s initial projections. Growth in revenue was largely attributed to a $245.5 million increase in Motor Fuels Tax revenue, following the end of 2023’s gas tax holiday, and investment income outperforming its projections by $27.9 million due to the retention of high federal interest rates. Other overperforming revenue sources were Motor Vehicle Receipts, which brought in $24.7 million more than projected and Licenses, Permits and Fees, which netted $18.5 million more than anticipated.
On the flip side, STF expenditures also increased from fiscal year 2023, growing by $184 million or 9.9%. The end of temporary federal funding led to an $83.3. million increase in expenditures on rail operations, and a shift of the state’s Town Aid Road Grants program from state bond authorizations to the STF led to another $60 million in expenditures. The report also highlighted several revenue sources as having underperformed their projections, such as the state’s Highway Use Tax, Oil Companies Tax and STF Sales and Use Tax.
Scanlon concluded the report with a future outlook section, claiming that the future of state’s budgetary health is largely dependent on the nation’s economy as a whole.
“Connecticut’s budget results are ultimately dependent upon the performance of the national and state economies,” reads the report. “In FY 2024, the economy proved itself resilient to the highest interest rates in twenty years, with continued growth in jobs and consumer spending.”
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