CT’s General Fund Surplus Projection Drops by $157.9 Million in One Month

The fiscal year is not quite at the halfway mark for Connecticut’s state government, and predicting what the bottom line will show when the fiscal year concludes is a moving target.

One month ago, Comptroller Sean Scanlon, in his monthly financial and economic update, projected a Fiscal Year 2026 General Fund surplus of $322.3 million and a Special Transportation Fund surplus of $14 million, both in general agreement with the Office of Policy and Management’s (OPM) projections.

Four weeks later, at the start of this month of December, the projections had changed.

Comptroller Scanlon, in his monthly financial and economic update, projected a Fiscal Year 2026 General Fund surplus of $164.4 million and a Special Transportation Fund surplus of $43.7 million, both in general agreement, again, with the Office of Policy and Management’s projections.

This month’s General Fund projection fell $157.9 million, largely due to a reduction in projected Corporation Tax revenues, as well as increasing shortfalls for Medicaid and housing programs, the Comptroller’s Office explained.

The Federal H.R. 1 (OBBBA) included a provision permitting corporations to immediately expense research and experimental expenses as opposed to amortizing them over a five-year period, to which Connecticut’s tax code automatically conforms, officials noted.

They pointed out, however, that despite that revenue loss, Connecticut Income and Sales Taxes continue to see positive growth. Overall, revenues are running just above the budgeted amount while expenditures are running $156 million too high, reducing the $309.1 million surplus built into the enacted budget. Cost overruns continue to be led by rising Medicaid spending, currently projected to exceed the budgeted amount by $85.0 million, driven by utilization growth and higher than expected cost per case, according to the projection analysis.

In a letter to Governor Ned Lamont, Comptroller Scanlon noted that, with the close out of fiscal year 2025, $1.4 billion was transferred from the Budget Reserve Fund (BRF), also known as the “Rainy Day Fund,” to reduce the State’s pension liabilities. H.B. 8003, passed in the November Special Session, temporarily set aside $500 million in excess of the BRF’s 18% cap to address certain federal funding reductions that may occur.

Back in September, the Comptroller’s Office had projected a Fiscal Year 2026 General Fund surplus of $350.5 million and a Special Transportation Fund surplus of $19.6 million.

Fiscal year 2026 began on July 1, 2025 and concludes at the end of June 2026.