After years of being in the red, the state of Connecticut now has a surplus of more than $1 billion because of higher than expected income tax collections since the beginning of the year. Democrats and Republicans have different ideas about what to do with the money.
The budget that Connecticut lawmakers passed last year included a so-called volatility cap that requires any income tax revenue received above $3.1 billion be set aside for the rainy day fund. Officials say about $1.1 billion has already been set aside because tax revenues are coming in at 46 percent higher than initially projected. That’s enough to erase the $200 million deficit for this fiscal year and the projected $165 million deficit for next year.
House Speaker Joe Aresimowicz says that’s why the Democrats would like some of the money to be used to to fund the state’s depleted Transportation Trust Fund.
“If this money allows us to make crucial investments, then we should do that. I’m not going to do what’s been done before. I’m not going to sit in a room and say here you get this, I get this, and we all vote for it. That’s just wrong for the state.”
House Minority Leader Themis Klarides says the Republican plan is to have the money split with $300 million going to pay down state employee retirement obligations, $300 million to the state’s teacher retirement fund, and $300 million to the rainy day fund.
“We are very proud that we can take this extra money we have and pay down those unfunded pension liabilities. We have to also look at other priorities.”
Democratic Governor Dannel Malloy disagrees. He says the surplus should not be spent.
“Putting a lot of cash into a pension at any given moment is a dangerous proposition. What you need to do is to steadily, regularly fund that obligation on a go-forward basis. So that you don’t become susceptible to downturns in the markets.’
Malloy says the $1 billion surplus is in part a result of profit taking from Wall Street, so the money should be left in the rainy day fund to help the state weather the next economic downturn. Legislative leaders are expected to begin budget negotiations next week.