Connecticut fiscal accountability report: short-term surpluses but fixed costs and policy choices pose out‑year risks

The Office of Fiscal Analysis (OFA) and the Office of Policy and Management (OPM) told members of the Appropriations and Finance committees on December hearing day that Connecticut expects an operating surplus in the current fiscal year but faces risks as it builds the next biennial budget.

“OFA” acting director Rob Wysock said the state is “now projecting a positive balance of $122,700,000 as of the middle of November.” OPM Secretary Jeffrey Beckham described a somewhat different near‑term estimate, reporting an operating surplus in the current year and cautioning that expenditures — especially fixed costs such as Medicaid and retiree health — will drive fiscal decisions in the coming biennium.

Why it matters: both offices emphasized that statutory fiscal guardrails (revenue and spending caps and the volatility cap) shape what the legislature can use from higher revenue years, and that several non‑permanent revenue sources and one‑time transfers that supported recent budgets (ARPA carryforwards, temporary municipal revenue sharing) are expiring and will exert pressure on upcoming budgets.

Major findings and figures presented

- OFA presented a FY25 projection that starts from the enacted budget and shows a net positive balance of about $122.7 million as of mid‑November, driven partly by lapses (for example, debt service lapses) and offset by deficiency pressures such as Medicaid and higher education retirement costs. (OFA: Rob Wysock)

- OPM’s November monthly letter and presentation showed an operating surplus in FY25 as well but emphasized that in FY26 the state’s current services estimate may exceed allowable spending under the statutory cap and that pension and Medicaid growth are the principal fixed‑cost drivers to watch. (OPM: Jeffrey Beckham)

- The state’s budget reserve fund stood at about $4.1 billion; statutory calculations put that near the 18% target of general fund expenditures and imply limited additional usable capacity. OFA and OPM both noted potential volatility deposit amounts if revenue performance continues. (OFA/OPM)

- Several onetime and temporary sources that buoyed recent budgets will not recur unless the legislature acts: expiring ARPA and carryforwards (roughly a few hundred million across FY24–25 in allocations), and roughly $105 million in municipal revenue sharing that was a temporary transfer in the last budget. (OFA)

Outlook and policy implications

Both offices framed the immediate task as bringing FY26 current services in line with statutory caps and available revenue. Beckham told the committees that OPM’s reading of FY26 current services places the state above allowable spending and that options to restore balance include reducing non‑fixed spending, identifying new revenue, or both. Rob Wysock noted that under the FAR (fiscal accountability report) statutory methodology OFA treats debt service, entitlements, and state employee benefits as fixed costs while holding other, variable costs constant for projection purposes.

The presentations also signaled items likely to drive February budget negotiations: the pending expiration of ARPA/carryforwards, a potential new collective bargaining agreement (the CBAC contract expires this fiscal year and would annualize at sizable amounts if patterned on the prior contract), and pressure to maintain recent municipal aid and education funding growth. Both presenters said they will continue to refine projections as late data (for example, state employee fringe and retiree health figures) arrive.

What to expect next

Committee members were told these presentations are preparatory to the formal biennial budget process. Both offices said they will provide updated monthly reports (including a December letter) and refined estimates and options ahead of the February budget submission.