Quarterly tax payments from self-employed individuals are the largest component of the increased state revenue estimate.
By Christine Stuart, CTNewsJunkie.com
Connecticut’s fiscal picture improved slightly from last month, but the state is still facing a $1.2 billion budget deficit and the budget picture remains incomplete.
The deficit is about 6.3% of general fund spending, but it had been as much as 10% just a month ago.
Gov. Ned Lamont asked lawmakers earlier this month to wait for new revenue projections before they look to close the deficit.
On Tuesday, Office of Policy and Management Secretary Melissa McCaw attributed the improvement to increased revenue and a reduction in spending.
State revenues have been revised upward by about $454.1 million since September. The largest portion of that is the estimates and finals portion of the personal income tax. That’s the portion that self-employed individuals, who don’t get a W-2 through an employer, pay the state on a quarterly basis.
The sales and use tax was also revised upward by $90.7 million and it continues to exceed projections. Withholding taxes, which are the taxes withheld from W-2 employees, have also been revised upward by $50 million.
Real estate conveyance tax collections are also being revised upward by $40 million and “may reflect pent-up demand from the early Spring when real estate transactions slowed at the height of the COVID pandemic,” McCaw wrote in her monthly letter to State Comptroller Kevin Lembo.
The state also expects to do well when it comes to capital gains because the “U.S. stock market is 14% higher than a year ago as measured by the S&P 500, which should bode well for capital gains realizations.”
However, McCaw points out that challenges, especially with budget projections, remain.
“Pandemic-related closures of many businesses may have caused deferred consumption of goods and services, resulting in pent-up demand that is now being realized,” McCaw said. ”Until a vaccine for the COVID virus is widely available, and absent further federal measures to stimulate economic activity, significant challenges may remain over the coming months. These challenges include reduced demand for air travel and reduced activity in the leisure and hospitality sectors with the onset of cooler weather and the resultant impact on important segments of the state’s economy.”
Which is the long way of saying that the state economy may face more challenges before things improve.
On the spending side of the budget there are still significant shortfalls.
There’s a $10.4 million shortfall from the Capital Region Development Authority account mainly due to the cancelation of events at Rentschler Field, XL Center, and the CT Convention Center. There’s also at least $50 million in red ink for the University of Connecticut Health Center for fringe benefits to their employees.
The projections do not include the “potential shortfall in the Connecticut State Colleges and Universities system.”
Earlier this month, CSCU President Mark Ojakian told Gov. Ned Lamont that the four state universities and dozen community colleges were facing a $70 million shortfall in revenue because enrollment was down.
“Our budgets are strained to dangerous levels, putting the financial health of CSCU in critical condition. The community colleges in particular are facing reserves near zero,” Ojakian wrote on Oct. 5. “I assure you that CSCU is committed to our process of rebuilding a sustainable model for public higher education in Connecticut, but we desperately need help in building a bridge to take us beyond this troubled year.”
McCaw said that “depending on measures the system may adopt to address the issue as well as potential assistance from federal CARES Act funding, the scale of this deficiency could materially impact our estimates later this year.”
The University of Connecticut is also experiencing a revenue shortfall, but was not mentioned in McCaw’s monthly letter.
UConn is facing a $76 million deficit and is seeking about $28 million in aid from the state.
Republished with permission from CTNewsJunkie.com, all rights reserved.
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