Looming Recession's Impact On CT Addressed By Lamont: What You Need To Know

CONNECTICUT — State finances are in much better shape to handle a recession should one come to pass, Gov. Ned Lamont said Thursday.

“It’s strong, even in the case of a recession, which is probably on the horizon,” Lamont said during a news conference.

Connecticut’s rainy day fund is filled to capacity at $3.1 billion, which is more than double the amount heading into the 2008 Great Recession, Office of Policy and Management Secretary Jefferey Beckham said.

State budget officials estimate that tax revenue tied to the stock market and businesses could drop by 14 percent in the current fiscal year, which just started last week. The rainy day fund is so well-funded that the state could absorb a 42 percent decline in those revenues before it affected the general fund, Beckham said. The largest single-year decline on record was 29 percent during the Great Recession.

“The rainy day fund is there in the face of a recession to make darn sure I don’t have to raise anybody’s taxes or slash spending,” Lamont said.

The federal Labor Department’s monthly jobs report will come out tomorrow, followed by the monthly inflation report next week. Both are used by analysts to project economic trends.

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Lamont said he is worried that the Federal Reserve will overreact and raise interest rates too high.

The state volatility cap was enacted during 2017 in a bipartisan effort to reign in Connecticut’s overreliance on boom-and-bust revenue. Excess tax revenue generated when business is booming and the stock market is soaring is put into the budget reserve fund, commonly called the rainy day fund. Money is transferred to the state’s pension funds when the rainy day fund coffers fill to capacity.

State actuaries estimate that extra payments made to state pension accounts have eliminated more than $11.5 billion in pension debt, State Comptroller Natalie Braswell said.