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Hartford — The state is still projected to have a $505 million surplus this year, according to a report released by the state comptroller’s office on Tuesday. State Comptroller Kevin Lembo said any surplus money gained in the last quarter of this year should go toward the state’s Rainy Day Fund or reserve fund in order to prevent budget deficits in future years.
“Sufficient dollars in reserve will guard against future tax increases and service reductions during inevitable future recessionary cycles,” Lembo said.
This information comes hours before the General Assembly’s Finance, Revenue and Bonding Committee will meet to negotiate and vote on taxes, fees and revenues for next year’s budget and help determine how this year’s surplus money will be spent.
Gov. Dannel P. Malloy has proposed putting about $250 million of the surplus in the state’s Rainy Day Fund, $100 million toward the state’s unfunded state pensions and $155 million for tax rebates.
There was $271 million in the state’s Rainy Day Fund last year, according to the comptroller’s office. Besides adding $250 million of this year’s surplus to the Rainy Day Fund, Malloy has proposed putting in an additional $30 million from surplus money that is expected next year.
If the $280 million were added, the fund would equal about 3 percent of total spending.
Statute caps the Rainy Day Fund level at 10 percent of spending and Lembo has been advocating for a reserve of 15 percent of spending.
Lembo said that policymakers should keep in mind that this year’s budget relies on $303 million in funds from fiscal year 2013 and that much of the surplus money this year is from a one-time tax amnesty program and from volatile capital gains in the income tax.
The current surplus might increase if the revenues in the last quarter continue to grow as has happened in other quarters this year, Lembo said. The three largest tax categories -- income, sales and corporate taxes -- have exceeded expectations, he said. The largest gain is in the income tax, $213.1 million, which includes capital gains from a strong stock market, Lembo said.
However, he cautioned in his press release that "both OFA (Office of Fiscal Analysis) and OPM (Office of Policy and Management) have estimated budget shortfalls beginning in fiscal year 2016 if current policies remain unchanged,” Lembo said.