The Central Connecticut Chambers of Commerce hosted a legislative roundtable event on Tuesday, May 7, where state comptroller, Kevin Lembo, discussed the state’s financial standings.
Lembo reported Connecticut can expect a surplus of approximately $581 million for the current fiscal year. But, a deficit has been projected for next fiscal year, and the one following. In the short term, he explained, the state will use the surplus funds to make significant contributions to the budget reserve fund (the “rainy day” fund).
About five years ago, Lembo had put forward a model that he said would tie the hands of the legislature “when the economy starts to pick up, or, when one time revenue comes in the door.” The legislation, agreed upon by both parties, asks that the state “grab one time revenues” or revenues above what was anticipated, and put those funds into the state’s savings account.
At the start of this process, Connecticut’s rainy day balance was between $100 million to $200 million. Today, Lembo said, the balance is $1.2 billion. And, if trends continue until the end of the fiscal year (June 30, 2019), the state will make an additional transfer into the fund, bringing the balance up to $2.65 billion.
Lembo explained that nationally, it’s agreed upon that there should be approximately 15 percent of the general budget set aside into a savings account. Should the rainy day balance reach $2.65 billion, the account would have approximately 13.9 percent of the state’s total government budget. The second part of the legislation states once the fund hits 15 percent, Connecticut will continue to grab one time revenues, but, the funds will be used to “pay down pension liabilities and we pay down indebtedness.”
Currently, Connecticut has an unemployment rate of 3.9 percent, tracking in line with the national level of 3.8 percent. At 3 percent unemployment, the state will consider that number as “close to full employment.”
He reported that wages are up and as a result, as is withholding tax. The withholding tax is currently 7.8 percent over last year. The state had only budgeted 5 percent, and that is why, Lembo explained, “you start to see surplus numbers.”
Lembo discussed two House bills that would have major impacts on healthcare and health insurance costs. House Bill 7174 would bring “pharmacy transparency,” by forcing a rebate price at the point of sale on medications, and allowing businesses to have prices similar to what the state pays for state employees. House Bill 7267 would allow businesses who employ 50 people or less, to purchase health insurance coverage at the same rates as state employees. H.B. 7267 is on the current docket.
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