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Analysis of FY 2017 Connecticut Revenue Projections


Revenue projections are inherently imprecise estimates. Predicting incoming tax receipts accurately relies upon correctly forecasting economic growth and market performance. Given the uncertainty surrounding these predictions, Connecticut periodically revisits and revises its revenue projections throughout the fiscal year to take new data into account. The Center on Budget and Policy Priorities, a nonpartisan think tank that focuses on the impact of federal and state government budget policies, has identified five best practices for revenue forecasting to create a strong, reliable, and trustworthy forecast. These best practices are listed below:

The Connecticut General Assembly’s Office of Fiscal Analysis (OFA) in May predicted a fiscal year 2017 deficit of nearly $400 million.[1] OFA cites eroding personal income tax receipts as the primary reason, which fell short of their April target by $300 million.[2] Comptroller Kevin Lembo reports Connecticut’s Budget Reserve Fund is insufficient to cover this deficit, and that original personal income tax projections held an overly optimistic outlook on the stock market in late 2016.[3] Benjamin Barnes, Secretary of the Governor’s Office of Policy and Management, concurs with these analyses.[4] According to the Office of Fiscal Analysis, the decline in income tax collections is largely a result of a decrease of approximately $200 million from the top 100 taxpayers.[5] Connecticut relies heavily on the taxes collected from these high income earners to create a balanced budget.

The graphs in this visualization show how the most recent revenue projections differ from the original budgeted amounts at the start of the fiscal year. The scatter plot on the left shows individual revenue items based upon their original budgeted amount and the cumulative revisions made on them throughout the fiscal year, with larger line items appearing further to the right. Cumulative revisions less than zero indicate the revenue source did not meet the budgeted expectation, while cumulative revisions greater than zero indicate a revenue source exceeded the budgeted expectation. The bar graphs on the right show how revenue projections have changed throughout the year, with the massive drop-off in April occurring as a result of unrealized personal income tax projections.

Connecticut could improve its practices for developing revenue projections by consulting with outside experts, as recommended by the Center on Budget and Policy Priorities.


Endnotes

[1] Connecticut General Assembly, Office of Fiscal Analysis. (2017). FY 17 General Fund Budget Projection. Retrieved from https://www.cga.ct.gov/ofa/Documents/year/PROJ/2017PROJ-20170505z_May%205,%202017%20General%20Fund%20Projections.pdf.
[2] Ibid.
[3] State of Connecticut, Office of the State Comptroller. (2017). Comptroller Lembo Reports $393.4-Million Deficit After Continued Income Tax Erosion [Press release]. Retrieved from http://www.osc.ct.gov/public/pressrl/2017/May2017FinancialStatus.pdf.
[4] Barnes, B. (2017, May 1). [Letter to Kevin Lembo]. Retrieved from http://www.ct.gov/opm/lib/opm/budget/comptrollerletter/fy2017/2017
_may_1_comptrollers_letter_revised.pdf.
[5] Connecticut General Assembly, Office of Fiscal Analysis. (2017). FY 17 General Fund Budget Projection. Retrieved from https://www.cga.ct.gov/ofa/Documents/year/PROJ/2017PROJ-20170505z_May%205,%202017%20General%20Fund%20Projections.pdf.

Citation

Connecticut School Finance Project. (2017). Analysis of FY 2017 Connecticut Revenue Projections. Available from http://ctschoolfinance.org/reports/fy2017-revenue-projections.