Those projections were included Friday in the latest monthly budget estimates from Gov. Ned Lamont’s administration, which also forecast a $3.8 billion surplus for the current fiscal year.
While most of that projected windfall will help pay down pension debt, the remaining $200 million will be deposited into the state’s emergency budget reserve to keep it at its legal limit.
The rainy day fund, which cannot hold more than 15% of annual operating expenses, is maxed out this fiscal year at $3.1 billion. But because the next state budget boosts spending by about 6%, the rainy day fund can accept another $200 million once the new fiscal year begins in July.
The extra pension payments will come just one year after the state broke new ground with a $1.6 billion supplemental deposit into pensions.
But with $40 billion in unfunded obligations amassed over seven decades, Connecticut’s per capita pension debt is among the highest in the nation. Even with the supplemental payments, that debt is projected to place considerable pressure on state finances for another two decades.
Still, those supplemental payments are expected to drive down the minimum required contributions the state must make. Lamont has estimated that within the next few years those minimum annual payments could shrink by more than $400 million, freeing those resources for other priorities.
Surplus appears smaller, but in one respect it’s larger
Those extra pension payments largely were made possible by state tax revenues that have surged since 2018 and a new savings program begun around the same time that forces legislators to save a portion of quarterly income and business tax receipts.
Revenue projections, which have risen frequently during this period, jumped again Friday, even as the $3.8 billion surplus projection — at first glance — is down from the $4.8 billion cushion projected just one month ago.