The state's unanticipated $400 million budget surplus for the fiscal year that ended June 30 "should be a sign of cautious optimism for the future -- a good outcome," says Comptroller Kevin Lembo. But the comptroller, who announced the surplus this week, was right to warn people not to draw too many conclusions from it.
This surplus, welcome as it is, and hopefully a harbinger of better things to come, was built largely on one-time capital gains revenues that will not be repeated. It is most likely not evidence that Connecticut's economy has caught fire after nearly half a dozen years in the doldrums.
Warnings of trouble ahead can be seen in the slight dip from last year in the payroll component of the income tax, which accounts for 60 percent of total income tax receipts, and the possibility that Medicaid expenses this fiscal year will exceed the budgeted amount.
Although states in general are slowly recovering from the Great Recession in terms of tax collections, the recovery from state to state is uneven, reports Stateline, a news service of the Pew Charitable Trusts. The employment and housing sectors have picked up in some states but not in others. Recoveries are more robust in the West and South, slower in the Northeast and Midwest.
"Five years after the 2008 financial crisis that sent the U.S. economy into a tailspin, only a handful of states are charging full steam ahead," says Stateline.
In our corner of the Northeast, Connecticut continues to scramble to gain economic traction.
We're pleased there's a healthy surplus at the end of the last fiscal year, and that $178 million of the surplus will be deposited in the rainy day fund, the state's shield against economic upheaval.
But the rainy day fund should contain approximately $3 billion -- 15 percent of the current general fund -- if it is to be an adequate buffer, according to Mr. Lembo.
Connecticut is just starting to climb out of a very deep hole.
Reprinted with permission of the Hartford Courant.
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