While confirming that state government’s finances have slipped yet again, Comptroller Kevin P. Lembo also said Friday that a few “bright spots” show Connecticut’s economy might not be done growing.
And while the state entered a new fiscal year Friday, Lembo certified a $315.8 million deficit in the the outgoing budget — a shortfall that worsened largely because of further slippage in state income and sales tax receipts.
The deficit for the 2015-16 fiscal year, which is $56.7 million worse than projected one month ago, potentially could leave Connecticut with only about $90 million in its emergency reserve – a level equal to about one-half of 1 percent of annual operating costs.
Lembo, who recommends a reserve of 15 percent, will not formally close the books on 2015-16 until the end of September.
Despite the likelihood of Connecticut’s finishing in the red for the second fiscal year in a row — and further slippage in two important tax revenue sources — “it’s also important to look at everything together,” the comptroller said.
And while the state economy as a whole continues to recover at a slow rate, the housing market and housing spending offer positive signs.
“A bright spot in the state’s economy has been the number of housing sales,” Lembo said, noting that single-family home sales in Connecticut grew by 16.2 percent in April compared with 12 months earlier, and that sales prices for those homes rose by nearly 1 percent in April compared to a year ago. “This is the first price gain after 12 consecutive months of price drops on a year-over-year basis.”
The comptroller also pointed to consumer spending data that showed nine of 13 major categories rose in May compared with the prior month, led by spending on gasoline and online retail purchases.
There even is some good news hidden among Connecticut’s income tax receipts for 2015-16, which were downgraded this month by $75 million from earlier expectations.
While that loss was driven largely by declining revenues tied to capital gains, dividends and other investment income, receipts from paycheck withholding ran 3.3 percent in May above the same month one year ago.