State Comptroller Nancy Wyman confirmed this afternoon that Connecticut appeared to close the last fiscal year $393.3 million in the black.
That forecast, up $150 million from projections issued last month, should enable state officials to reduce planned borrowing to support the current budget.
Wyman, who reported the surplus in her latest monthly projection, will formally close the books on the 2009-10 fiscal year in one month. Though the last fiscal year ended on June 30, various taxes continue to accrue over the summer.
Receipts of the sales tax have been on the rise since March and increased by nearly $39 million over the last month, the comptroller reported. “The improvement in the sales tax is a good indicator that our economy is slowly turning around,” Wyman said, “but overall growth is still far below what we need for a full recovery.”
Despite that growth, the sales tax is expected to generate about 4 percent less revenue in 2009-10 than in the prior fiscal year, Wyman said, adding that income and corporate tax receipts should finish up just 1.2 percent, despite significant rate hikes ordered for both taxes.
The upgraded surplus will provide some immediate relief for the current fiscal year, but much larger fiscal challenges still loom ahead.
Gov. M. Jodi Rell and the legislature used a portion of the 2009-10 surplus, $139.3 million, to help support spending in this fiscal year’s $19.01 billion budget.
But the Republican governor also insisted that the Democrat-controlled legislature dedicate any further surplus beyond that $139.3 million mark to scale back a controversial plan to balance 2010-11 by borrowing $955.9 million. That debt would be paid off over the next eight years with a surcharge on monthly electric bills and by raiding an energy conservation fund.
The new surplus number means state government would need to borrow just under $702 million in principal, or 23.4 percent less.
And state government still faces a $3.37 billion deficit projected for the fiscal year that starts 11 months from now, a deficit equal to 18 percent of current spending and 8 ½ times the size of this new surplus.
Neither Wyman nor Rell’s office have issued any projections yet for the current fiscal year. Rell’s first estimate is due on Aug. 20 and Wyman’s is due on Sept. 1.
But the current budget was balanced in part on the assumption Congress would expand the emergency federal stimulus program, providing Connecticut with $366 million in additional health care and education grants. Congress still has not approved any stimulus expansion plans and the latest bills being debated have included funding below the level assumed when Connecticut officials projected a 366 million increase for the state.