CT Faces Large Future Budget Deficit

CONNECTICUT — Connecticut’s state finances in the short term are in a good place, but the state will face billions of dollars worth of budget deficit challenges in coming years.

“In the near term we’ve done very well, long-term we’ve got challenges,” Gov. Ned Lamont said at a news conference.

The state budget would likely be very lean going forward, he said.

The state finished off the fiscal year that ended in June with a $39 million budget surplus, Lamont said. The state’s rainy day fund reached a new record and is funded to the limit, which will allow around $62 million to be put toward the state’s pension plans. Connecticut’s rainy day fund is the 7th strongest in the country and has $3.1 billion in it.

Connecticut’s finances were shored up in part thanks to federal stimulus and aid.

The pandemic has caused a great amount of volatility in the deficit projection process, said state Comptroller Kevin Lembo. The comptroller’s office was projecting around a $900 million deficit for the fiscal year that recently ended and instead the state got a small surplus.

“We know that the global pandemic is having an impact and we will continue to monitor the trends,” said Office of Policy and Management Secretary Melissa McCaw in a statement.”The news that we are receiving today demonstrates we are in a strong starting position as we enter this new fiscal year with many challenges that lie ahead.”

Lamont’s administration is projecting a $2.1 billion deficit for the fiscal year that started in July and a $3.5 billion deficit for the next two fiscal years. Debt and unfunded pensions are 33 percent of Connecticut’s GDP. The amount is one of the highest in the nation as a percent of GDP or per capita, Lamont said.

Lamont’s administration will work with an outside consultant to identify efficiencies and cost savings for the executive branch. The 2018 legislature directed the governor to hire the consultant.

Lamont has made some changes to help streamline government. Human resources is being centralized instead of every department having its own inner department. HR staffing is down 10 percent from a year and a half ago when Lamont took office and Lamont’s administration estimates it will go down another 10 percent in the future.

The state reversed a trend in housing with 10.18 percent more listings in recent months and a median list price increase of 6.37 percent up to $299,900.