(HARTFORD, CT) – Governor Ned Lamont and Office of Policy and Management Secretary Jeffrey Beckham released the following statements in response to the November 2023 consensus revenue forecast, which was jointly issued today by the Office of Policy and Management and the Office of Fiscal Analysis:
Governor Lamont said, “The policies we’ve put into effect over the last several years are boosting Connecticut’s fiscal health and making our state stronger. We remain in a position in which we are able to continue paying down legacy debt built up over the decades by previous administrations, and in just two months the largest income tax cut in state history will go into effect. This forecast demonstrates the importance of the revenue and volatility caps in giving the state a buffer from potential economic downturns. Other states do not have the strong fiscal guardrails that we have in place and are seeing erosion in their general fund revenue because of their reliance on volatile revenue sources.”
Secretary Beckham said, “While we are seeing some softening in our revenue projections, our overall state fiscal position remains positive. However, as we work on budget adjustments for fiscal year 2025, we must be mindful of the need to adhere to the constitutional spending cap. Much like families around the state make decisions on how much they can spend based on their own family budget, they expect state leaders to think the same way. The administration’s position is that we should avoid gimmicks that circumvent the spending cap and the other fiscal guardrails.”
According to this consensus revenue forecast, projected revenues have been revised downward by a net $57.1 million from the Office of Policy and Management’s October 20 letter to the comptroller. Relative to the adopted budget, revenues are up $24.4 million. The Office of Policy and Management still anticipates ending fiscal year 2024 with a surplus. The largest change is in the estimates and finals component of the personal income tax, which is down $150 million as the trend in estimated payments portends a weaker than anticipated fourth estimated payment due on January 15, 2024. Revenue from the pass-through entity tax has been revised downward by $54.7 million for the same reason as estimates and finals. The sales and use tax is being revised downward by $125 million as collections slowed toward the end of fiscal year 2023, necessitating a downward adjustment to fiscal year 2024 projections. Relative to the adopted budget, revenues are up $24.4 million.
Federal grants have been revised upward by $138.5 million, due largely to the final reconciliation of federal funds received to those earned for medical services during the second half of fiscal year 2023. Investment income has been revised upward by $60 million as rising interest rates and greater assets under state management boost collections. Given the projected changes in estimates and finals and the pass-through entity tax, the transfer to the budget reserve fund pursuant to the volatility cap is anticipated to be $478.5 million, of which half will be transferred to pay down pension liabilities and the remainder used to increase the budget reserve fund. The special transportation fund revenues have been revised downward by $11.5 million. The largest change is in the highway use tax, which is down $25 million to reflect current trends in collections. Interest income has been revised upward by $8.2 million to reflect higher interest earnings in the fund.