Posted on December 17, 2021
Cautious Optimism on State Budget
By State Rep. Kathy Kennedy
As a member of the Appropriations Committee, last week I had the opportunity to review the Fiscal Accountability Report (FAR) issued by the Governor’s Office of Policy and Management and the legislature’s Office of Fiscal A. The (FAR) provides revenue and expenditure trends as they relate to the state budget to help policy makers develop future budgets.
Right now, the overall picture for the state is positive with Connecticut continuing to have state surpluses for fiscal years 2022 and 2023, until Federal funds decrease leading to deficits in fiscal years 2024-2026. And there lies the big problem, the state will run projected budget deficits of $931.9 Million in Fiscal Year 2024, $670.3 Million in Fiscal Year 2025 and $325.6 Million in Fiscal Year 2026.
One of the good things we can do with our excess state revenue is pay down some of our pension debt and obligations. An estimated over $1 Billion in both fiscal years 2022 and 2023 being transferred to the State Employee Retirement System and Teacher’s Retirement System accordingly.
Additionally, due to excess in the Rainy-Day Fund, Connecticut is able to transfer funds into the Special Transportation Fund with the fund balance growing from $241.1M in FY22 to $1.2B in FY26. I’m cautioned by this news because the main driver for this increase is mostly driven by better than expected Sales and Use Tax collections. The oil companies’ tax is also increased mainly due to the increase in the price of oil. Next year, the new “Truck Tax” begins. This is projected to bring in $45M in revenue in FY 23 and approximately $90M in revenue once fully implemented. This is sobering news for working families that will be paying more for home heating oil, gas for their vehicle and food due to the new truck tax.
The main item to glean from the meeting is that the projected budget deficits are largely due to the expiration of federal dollars. If we are not careful, the over-reliance on federal dollars from the America Rescue Plan could cause a huge fiscal disaster in the out-years.
The legislature’s Office of Fiscal Analysis is projecting that there is a positive structural balance going forward, which means revenue growth is outpacing fixed cost growth. This positive structural balance is largely due to the projected annual contributions to the State Employee Retirement System/Teachers Employee Retirement System funds. This is a result of excess Budget Reserve Fund (BRF) funds going towards these two accounts. This partly mitigates the loss in federal revenue, however there are still deficits in the out years despite this positive structural balance.
I will not support raising taxes on middle class families to make up for the expiration of federal dollars. Instead we need a comprehensive plan to solve the future deficits without asking taxpayers for more revenue, particularly as families are facing higher costs for food, fuel and other basic household items.
As always, please contact me should you have any questions about this important issue or concerns on any other topics relating to state government at Kathy.Kennedy@housegop.ct.gov or at (800) 842-1423.