Comptroller Kevin Lembo this week reported the state’s financial status has continued to improve and estimated a surplus of approximately $398.79 million at the end of the current fiscal year.
In a letter to Gov. Dannel P. Malloy, Lembo attributed the surplus to low spending growth and revenue growth that exceeded expectations.
Of the surplus total, $220.8 million has been reserved for future fiscal year activity and $178 million will be deposited into the Budget Reserve Fund – or “Rainy Day Fund” – bringing the Budget Reserve Fund balance to $271.5 million.
“This payment is a great first step towards replenishing the Budget Reserve Fund,” Lembo said. “The ultimate goal for funding the Rainy Day Fund should be approximately $3 billion – or 15 percent of the current General Fund – in order to fully protect taxpayers against future economic downturns.
“The state’s surplus should be a sign of cautious optimism for the future – a good outcome, but potentially the result of one-time revenue windfalls. The growth was largely driven by strong stock market performance and an increase in the federal capital gains tax rate that pushed future year gains into Fiscal Year 2013. The payroll component of the income tax, which accounts for 60 percent of the total income tax receipts, was down slightly from last year.”
Lembo noted that General Fund spending for Fiscal Year 2013 was up $244.1 million – or 1.3 percent – over the prior fiscal year.
“To put this level of growth into historical context,” Lembo said. “In the four fiscal years leading up to the 2008 recession, average annual General Fund budget growth was 7.3 percent.”