Connecticut’s current fiscal situation brightened further this week, with this year’s budget surplus now projected at nearly $4 billion.
On April 20, the Office of Policy and Management projected a surplus of $ 3.95 billion for fiscal 2022, or 1.2 billion dollars more than the amount it planned there to barely a month.
The surplus includes $2.1 billion in the general fund and $1.87 billion under a savings program passed by the legislature in 2017 to build the state reserve fund.
Under bipartisan budget reforms enacted in 2017, the Rainy Days Fund balance is capped at $3.1 billion, with additional revenue allocated to pay down the huge unfunded liabilities of state employee pension plans. State.
Increase in small business taxation
Among the sources of increased state revenue? A small business tax.
Revenue from the state entity transmission tax, introduced in 2018 to help small businesses mitigate the $10,000 federal cap on state and local tax deductions, rose $700 million this year. year.
This tax is offset by a corresponding tax credit, the legislature and the administration have reduced to 87% one year after its implementation, costing small businesses to the state 53 million.
The AABC has called for credit to be restored to its original level of 93% to support small businesses struggling to recover from the pandemic.
The AABC also supports extending the state’s research and development tax program to small businesses, although legislation supporting this has not passed the Committee on Finance, Revenue and Bonds.
The Senate approved a law on April 21 requiring a study by several state agencies on the impact of extending the R&D tax credit to small businesses.
The Lamont administration and legislative leaders are currently negotiating revisions to the current fiscal year.
The credits of the General Assembly Committee approved a budget of $ 24.2 billion for April 7 2023 year, increasing spending by 8% from current levels.
The committee’s budget invests about $125 million in child care and provides additional funding for workforce development, but provides no relief to businesses facing a 22% hike in labor taxes. unemployment.
Continuing last year’s funding theme, the committee’s budget hinged on a combination of optimistic revenue projections and one-time federal funding from the US bailout bill.
There was also a significant difference between this proposal and the Finance Committee’s budget, which has been criticized for circumventing both the statutory income and expenditure ceilings.
The committee accepted the majority of Governor Ned Lamont’s tax relief proposals, which included increasing the property tax credit from $200 to $300, expanding eligibility and accelerating the introduction gradual exemption from income tax on pensions and annuities.
Legislative Republicans issued a tax relief proposed $ 1.2 billion on April 21, including the first reduction in the tax rate on the state income in 27 years.
The GOP proposal also extends the current gas tax suspension beyond June 30, temporarily lowers sales tax rates, and allocates $225 million toward the current $463 million unemployment fund debt. of State.
Despite continued increases in state revenue, Connecticut faces large projected budget deficits, beginning in fiscal year 2024.
The Office of Fiscal Analysis provides budget deficits of the State of 931.9 million in 2024, 670.3 million for Fiscal 2025 and 326.6 million for the year 2026.
AABC President and CEO Chris DiPentima said it was essential that policymakers maintain fiscal discipline while supporting key investments in the state’s recovery from the pandemic.
“Let’s invest in our economic recovery through meaningful workforce development programs, paying down Unemployment Trust Fund debt and supporting small businesses,” he said.
For more information, contact AABC’s Ashley Zane (860.244.1169) | @AshleyZane9