As budget vote nears, revenue estimates are mixed blessing

Gov. Dannel P. Malloy got some good fiscal news late Friday that may complicate his budget and labor negotiations: The current-year surplus is growing by $300 million, and the revenue estimates for the next fiscal year are up by $282 million.

The improving revenue numbers give Malloy more flexibility in balancing the budget for fiscal 2012, but they also are bound to ease the pressure on state employees to meet the governor’s demand for $1 billion in concessions and other labor savings.

With Malloy pressing for a budget vote early next week, the new revenue numbers also may cause problems in the legislature, where some lawmakers have been complaining about some of Malloy’s proposed tax increases, especially a 3-cent-a-gallon hike in gasoline taxes.

The governor anticipated the complications of a rosier fiscal outlook earlier this week, when he warned that any bump in projected revenues should be used to retire debt, not to restore spending cuts or reduce tax hikes.

“I want to be the guy who keeps sounding the alarm about falling back on the behaviors that got us here,” Malloy told The Mirror on Tuesday, when many legislators were anticipated that revenue estimates for 2012 would jump by at least $200 million.

Today, his communication director, Colleen Flanagan, reinforced that statement.

“Gov. Malloy believes we should use additional revenue to continue to stabilize the state’s finances.  He thinks this year’s revenue surplus should be used to avoid securitization and pay down existing debt, both of which were incurred because this budget was put together using borrowed money for operating expenses,” she said.

Flanagan said Malloy still is insistent on sticking with his proposed tax increases, which will allow the state to reduce more debt. But the unions and their allies are likely to view the added revenue as meaning that a $1 billion problem for labor just shrank to $718 million.

Whatever the political complications, the new fiscal forecasts are signs that tax revenues are rebounding from the recession.

“These numbers are further evidence of a thaw in Connecticut’s long economic winter,” said House Speaker Christopher G. Donovan, D-Meriden. “A year ago we passed a responsible budget designed to help Connecticut get through tough times. We learned today that not only does it appear we will finish the current year in the black, but that the amount of surplus by the end of the fiscal year could eliminate any need for borrowing. The steps we took to resolve the challenges we faced are working for our state.”

The consensus revenue estimates for the coming fiscal year were issued by the governor’s Office of Policy and Management and the legislature’s non-partisan Office of Fiscal Analysis.

OFA also issued the new projection of a current-year surplus, based on higher-than-anticipated income tax and corporate tax payments. In March, OFA predicted the state would end the year with a $158.3 million general-fund surplus. Today, it is forecasting a $458.1 million surplus.