The surplus would reach
approximately $212.3 million on a modified cash basis accounting.
In a letter to Gov. Dannel
P. Malloy, Lembo said this projection shows a slower overall rate of
General-Fund spending growth of about 2 percent over last fiscal year. General
Fund revenues for Fiscal Year 2013 are estimated to increase at a 3.6 percent
rate over last year.
Lembo cautioned that the
surplus is good news for the current fiscal year, but is largely attributed to
unreliable revenue sources that the state may be unable to count on in the
following years.
The surplus results from
an improved revenue outlook and spending restraint,” Lembo said. “Deficit
mitigation efforts, constraints on payroll growth, and fringe benefit budget
reductions have contributed to the slower overall rate of spending growth.
“Double-digit growth in
the estimated and final payment components of the income tax associated with
strong capital markets and tax changes, as well as windfalls in the inheritance
and estate tax, are driving the gains in receipts.”
As Lembo cautioned last
month, “These revenue gains are welcome, but have the potential to be one-time
windfalls. The slow rate of the economic recovery continues to present budget
challenges.”
Economic data from federal
and state Departments of Labor and other sources show:
- The state added 6,300 payroll
jobs in April. Over the 12-month period ending in April, the state has had
six months of job gains and six months of job losses. The net result over
that period has been a gain of 10,800 jobs.
- According to the Department of
Labor, Connecticut has recovered 57,500 positions or 47.4 percent of the
121,200 seasonally adjusted total nonfarm jobs that were lost in the state
in the March 2008-February 2010 recession. The jobs recovery is now 38
months underway. A recession in the 1990s resulted in a state job loss of
almost 160,000 payroll positions. It took 84 months to recover the jobs
lost to that recession.
- The strongest job sectors on a
year-to-year basis have been leisure and hospitality (+5,900), education
and health services (+5,700) and construction (+4,000). The sectors
experiencing the largest job losses are manufacturing (-2,500), government
(-1,400), and financial activities (-2,200).
- Connecticut’s unemployment rate
in April remained fixed at 8.0 percent; the national rate was 7.5 percent
that month. Average weekly
claims for unemployment rose in April, but remain well below the 2009 peak
level.
- In 2012, Connecticut personal
income advanced 2 percent, ranking the state 49th nationally in
income growth.
- The strongest growth in the New
England region was in Vermont with growth of 3.4 percent. Nationally,
income grew at a 3.5-percent rate in 2012. Quarterly personal income in
Connecticut performed better in the first half of 2012 than the second
half (the income figures for the 1st quarter of 2013 will be
available in June).
- According to the Department of
Labor, average hourly earnings at $28.15, not seasonally adjusted, were
down thirty-five cents, or -1.2 percent from the April 2012 hourly pay
estimate. The resulting average private sector weekly pay was estimated at
$943.03, down $34.52, or -3.5 percent over the year.
- The slow rate of job and income
growth has had a significant impact on the payroll withholding component
of the income tax.
- The Consumer Price Index (CPI)
for all urban consumers was advancing at a 1.1-percent rate in April.
- Housing permits in Connecticut
have continued to post strong gains coming into 2013. For the 12-month
period ending in April, housing permits were close to 60 percent from the
same period last year. This is almost double the national growth for the
period.
- According to the Census Bureau,
U.S. new home sales increased 29 percent from last March. Sales in the
Northeast were up 3.4 percent from April of last year. Nationally sales in
April were above March levels; in the Northeast sales declined in April.
- Results for the larger existing
home sales market, according to the National Association of Realtors
(NAR), were: Nationally, April sales were up 0.6 percent from the previous
month, and sales were up 9.7 percent from April of last year. Home prices
were up a solid 11 percent from one year ago. Prices have increased for 14
consecutive months for the first time since the 2005-2006 market
acceleration. The median time a home was on the market was 46 days based
on April data, down from 83 days a year ago. Existing home sales in the
Northeast were up 1.6 percent on a month-over-month basis in April. Sales
were up 4.9 percent from April of last year. Home prices in the Northeast
were up 5.1 percent for the year to a median price of $245,100.
- At this writing, major equity
markets are up over 100 percent since January 2009. Stocks are still
trading close to historical medians of price to earnings at around 18
times earnings.
S&P:
Dow
Industrial Average
Consumers
- April advance retail sales were
up 3.7 percent from the same month one year ago. The strongest gains were
in automobiles, and non-store retailers.
- The Conference Board’s Consumer
Confidence Index hit a five-year high in May. Consumers were considerably
more optimistic about the short-term outlook. Those expecting business
conditions to improve over the next six months increased to 19.2 percent
from 17.2 percent, while those expecting business conditions to worsen
decreased to 12.1 percent from 14.8 percent.
- According to the Federal Reserve,
consumer credit increased at a
seasonally adjusted annual rate of 5-3/4 percent during the first quarter.
Revolving credit was little changed, while non-revolving credit increased
at an annual rate of 8 percent. In March, consumer credit increased at an
annual rate of 3-1/2 percent.
Business
and Economic Growth
- Based on advance estimates, real
Gross Domestic Product grew at an annual rate of 2.5 percent in the 1st
quarter of 2013. This follows 4th quarter growth of just 0.4
percent.
- First quarter corporate profit
data will be released on June 26. Corporate profits advanced 6.8 percent
in 2012 after growth of 7.3 percent in 2011. Net dividend distributions in
the 4th quarter of 2012 were up 23.2 percent from the same
quarter a year ago.
- With respect to corporate
financial reporting and related transparency issues, many investors are
concerned with recent SEC rules that relax the reporting standards for
subsidiary activity. At a time that investors and policy makers are
seeking a more complete understanding of complex corporate structures and
offshore activity, the new disclosure rules are moving in the opposite
direction. This makes the work of institutional investors like state
pension plans and federal and state tax policy analysts more difficult.
The
SEC rules were discussed in a May 22 Wall Street Journal article. The Journal
reported that some of the biggest U.S. companies have quietly removed hundreds of offshore subsidiaries
from their public financial disclosures over the past several years. Software
maker Oracle Corp., for instance, disclosed more than 400 subsidiaries in its
2010 annual report. By 2012 the list had been whittled to eight—five of which
were located in Ireland. Oracle declined comment. Google went from over 100
subsidiaries reported in 2009 to zero. Microsoft, FedEx and Raytheon also shed
hundreds of subsidiaries from their reporting.
The reporting change stems from SEC
rules that demand disclosure only when the subsidiary activity is deemed
“significant”. One result of the change is that companies limit information
about offshore operations, in particular units operating in countries regarded
as tax havens. For many
investors, even small disclosures matter. Information about a company's
subsidiaries can indicate whether its operations have diversified, how complex
the company’s financial transactions may be, and how global income is moving.
The lists of subsidiaries have been a reliable source for such information.
***END***
Tara DownesDirector of Communications
Office of the State Comptroller
860-702-3308
