FISCAL ACCOUNTABILITY

REPORT
FISCAL YEARS 2025 – 2028

A REPORT TO
THE APPROPRIATIONS COMMITTEE AND
THE FINANCE, REVENUE AND BONDING COMMITTEE
PURSUANT TO SECTION 2-36b OF THE CONNECTICUT GENERAL STATUTES

OFFICE OF POLICY AND MANAGEMENT

JEFFREY R. BECKHAM, SECRETARY

NOVEMBER 20, 2024

 OFFICE OF POLICY AND MANAGEMENT
FISCAL ACCOUNTABILITY REPORT
NOVEMBER 2024

TABLE OF CONTENTS
Page
Overview .................................................................................................................................................... 1
Current Fiscal Year Outlook ....................................................................................................................... 3
General Fund................................................................................................................................. 3
Special Transportation Fund ......................................................................................................... 7
Budget Reserve Fund .................................................................................................................... 8
Outlook for FY 2026 Through FY 2028 ....................................................................................................... 9
General Fund............................................................................................................................... 10
Special Transportation Fund ....................................................................................................... 17
Connecticut’s Economy............................................................................................................... 21
Special Topics .............................................................................................................................. 29
Fiscal Guardrails ............................................................................................................. 29
Spending Cap .................................................................................................... 29
Revenue Cap ..................................................................................................... 30
Revenue Volatility Cap ...................................................................................... 30
Long-Term Liabilities ...................................................................................................... 31
Pensions ............................................................................................................ 32
State Employees Retirement System (SERS) ....................................... 32
Teachers’ Retirement System (TRS)..................................................... 34
Pension Stress Test and Outlook ......................................................... 35
Other Pension Systems ........................................................................ 36
Other Post-Employment Benefits (OPEB) ......................................................... 38
Debt Service ...................................................................................................... 39
Medicaid ........................................................................................................................ 39
Municipal Aid ................................................................................................................. 42
State Workforce ............................................................................................................. 43
Federal Funds ................................................................................................................. 44

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Bonding .................................................................................................................................................... 46
Projected Bond Authorizations, Allocations, and Issuances ....................................................... 46
Statutory General Obligation Bond Debt Limit ........................................................................... 47
Bonding Caps .............................................................................................................................. 48
Budget Reserve Fund ............................................................................................................................... 49
Projected Tax Credits ............................................................................................................................... 54

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 OVERVIEW
Section 2-36b of the Connecticut General Statutes requires the Office of Policy and Management and the
Office of Fiscal Analysis to annually analyze issues affecting spending and revenue for the current
biennium and the three succeeding fiscal years, and to report those analyses to the Appropriations
Committee and to the Finance, Revenue and Bonding Committee. By statute, there are seven components
of the report:

1. A comparison of the consensus revenue estimate to annual growth in “fixed costs;”

2. Projected tax credits;
3. Estimated deficiencies for the current fiscal year;
4. Projected balance in the Budget Reserve Fund;
5. Projected bond authorizations, allocations and issuances;
6. An analysis of revenue and expenditure trends and of the major cost drivers affecting state spending;
and
7. An analysis of possible uses of surplus funds.

The information in this report outlines the challenges identified by the Office of Policy and Management
that will confront decision-makers when developing future budgets. A summary of findings is below, and
more detail can be found in the pages that follow.

FY 2025
The General Fund is projected to finish the year with a $190.3 million operating surplus, $107.5 million
less than the originally budgeted figure. The reduction in surplus is attributable to expenditure projections
which are $383.7 million above the level in the adopted budget which are being partially offset by $276.2
million in additional revenue above the level in the adopted budget.

In addition to the forecast surplus, we also forecast a volatility cap deposit to the Budget Reserve Fund
(BRF) of $1.4 billion resulting in a combined transfer to the BRF of $1.59 billion. We project that, after
transfers out of the fund and into the State Employees and Teachers’ Retirement Systems pursuant to the
close-out of FY 2024 and transfers into the fund of $1.59 billion in FY 2025, the fund balance will be $5.70
billion or 25 percent of net General Fund appropriations for the current year. Given that this balance will
likely exceed the statutory 18 percent cap for the Budget Reserve fund next fiscal year, additional transfers
to the State Employees Retirement Fund and/or the Teachers’ Retirement Fund are expected during the
close-out period for FY 2025.

The Special Transportation Fund is expected to finish the year with a $149.0 million operating surplus. The
fund balance on June 30, 2025, is projected to be $560.6 million.

FY 2026 Through FY 2028

General Fund revenues are projected to increase annually by $499.8 million for FY 2026 over FY 2025,
$691.7 million for FY 2027, and $752.2 million for FY 2028.

As depicted in the table below, “fixed” costs in the General Fund are anticipated to rise by $503.1 million
(4.1 percent) in FY 2026. The largest contributors to this projected increase are increased costs for medical
services including $167.3 million in Medicaid and $188.6 million in healthcare for retired teachers and
state employees. Beginning in FY 2027, debt service costs begin to add to healthcare expenditures as key
drivers of the forecast 4.1 percent increase in fixed costs. Finally, we forecast moderating fixed cost
growth, at 2.3 percent, for FY 2028. As noted in the last two reports, growth in pension costs is not
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anticipated to be a significant driver of future General Fund spending. This is mainly attributable to
changes in funding methodologies adopted since 2017 as well as additional contributions made possible
as a result of recent budget surpluses and volatility cap deposits.

Revenue growth in the General Fund is anticipated to be essentially equal to fixed cost growth for FY 2026
as a result of the use of one-time funds in FY 2025 that are not assumed to recur in FY 2026. Revenue
growth will be higher than fixed cost growth in FY 2027 and FY 2028 by increasing amounts. It is important
to note that expenditure growth in areas of the budget that are not considered “fixed” will continue to
drive the need to prioritize resources in the short-term – particularly as we enter the next biennium.

In the Special Transportation Fund, “fixed” cost growth from FY 2026 through FY 2028 is driven by growth
in debt service costs, while changes in state employee pension costs are not anticipated to grow. Unlike
the General Fund, Special Transportation Fund revenue growth will not keep up with increasing debt
service costs. Without additional revenue or reductions in transportation investments, the expected
increase in costs will outpace the growth in revenues in the long term, impacting fund solvency.

GENERAL FUND
(in millions)
FY 2026 vs. FY 2027 vs. FY 2028 vs.
FY 2025 FY 2026 FY 2027
Revenue Growth $ 499.8 $ 691.7 $ 752.2

Fixed Cost Growth

Debt Service $ 14.1 $ 122.2 $ 100.5
State Employee Pensions (19.2) 18.8 19.8
Teacher Pensions 53.7 50.0 (30.7)
State and Teacher OPEB 188.6 159.2 31.0
Medicaid 167.3 154.3 156.8
Other Entitlements 98.6 25.2 27.5
Total Fixed Cost Growth $ 503.1 $ 529.5 $ 304.9
Revenue Growth less Fixed Cost Growth $ (3.3) $ 162.2 $ 447.3

SPECIAL TRANSPORTATION FUND

(in millions)
FY 2026 vs. FY 2027 vs. FY 2028 vs.
FY 2025 FY 2026 FY 2027
Revenue Growth $ 5.6 $ 31.1 $ 30.5

Fixed Cost Growth

Debt Service $ 53.3 $ 107.8 $ 100.9
State Employee Pensions (2.7) 1.0 1.1
Total Fixed Cost Growth $ 50.6 $ 108.7 $ 101.9
Difference $ (45.0) $ (77.6) $ (71.4)

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 CURRENT FISCAL YEAR OUTLOOK
FY 2025 - GENERAL FUND
The adopted FY 2025 budget anticipated a $297.8 million balance at year end. The Office of Policy and
Management is projecting an operating surplus of $190.3 million, 0.8 percent of the General Fund.
Revenues are $276.2 million above the budget plan, while estimated expenditures are $383.7 million
above the budgeted level.

FY 2025 - GENERAL FUND

(in millions)

OPM Variance
Budget Estimate from
Plan 11/20/2024 Budget
Revenues $ 23,103.7 $ 23,379.9 $ 276.2
Expenditures 22,805.9 23,189.6 383.7
Operating Results - Surplus/(Deficit) $ 297.8 $ 190.3 $ (107.5)

Revenue
Projected revenues are $276.2 million above the level envisioned in the enacted budget for FY 2025 and
are reflective of the November 12, 2024, consensus revenue forecast. The largest change is in the
Estimates and Finals component of the Personal Income Tax, up $570.5 million, as FY 2024 ended better
than expected; the trend in estimated payments continues to exceed their target this fiscal year,
combined with continued strong performance in the equity markets. Similarly, revenue from the Pass-
through Entity Tax has been revised upward by $182.0 million. Collections of the Withholding Tax
component of the Personal Income Tax have been revised upward by $358.7 million as the tax continues
to grow faster than assumed in the budget. Federal Grants have been revised upward by $79.6 million
due to final reconciliation of federal funds received to those earned for medical services during the second
half of FY 2024, increased revenue due to the Substance Use Disorder waiver and re-estimates of other
Medicaid claimable activities. Offsetting these gains, Sales Tax estimates have been revised downward by
$324.7 million due to slower growth in taxable sales, continuing a trend that began in FY 2024. Health
Provider collections have also been revised downward by $66.4 million due to lower than anticipated
collections from the hospital sector and the expectation that this trend will continue. All other changes
net to a positive $229.0 million.

Given the projected changes in the Estimates and Finals component of the Personal Income Tax and the
Pass-through Entity Tax noted above, the transfer to the Budget Reserve Fund pursuant to the volatility
cap will increase by $752.5 million to a total of $1,403.5 million.

Expenditures and Discussion of Projected Deficiencies

The Office of Policy and Management forecasts that FY 2025 net expenditures will, in aggregate, be $383.7
million above the levels anticipated in the adopted budget, a decrease of $10.6 million from last month’s
estimate. A description of projected shortfalls and lapses follows.

Deficiencies: Shortfalls totaling $443.2 million are forecast in the following agencies.

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• Department of Revenue Services. A shortfall of $885,000 in Personal Services is anticipated which
may necessitate a release of a portion of funding withheld in order to achieve the “Reflect Historic
Staffing” lapse.
• Department of Administrative Services. A shortfall of $4.5 million is forecast, with $4.5 million in
the Personal Services account and $1.0 million in the Other Expenses account due to increases in
electricity and other premises costs which are partially offset by a $1.0 million lapse in the Rents
and Moving account as funds carried forward for purchase of an emergency vehicle for a driving
training course will not be needed.
• Military Department. A shortfall of $200,000 in Personal Services is anticipated which may
necessitate a release of a portion of funding withheld in order to achieve the “Reflect Historic
Staffing” lapse.
• Department of Housing. A $4.0 million shortfall is projected in the Housing / Homeless Services
account as a result of rent increases.
• Office of Health Strategy. A shortfall of $226,000 in Personal Services is anticipated which may
necessitate a release of a portion of funding withheld in order to achieve the “Reflect Historic
Staffing” lapse.
• Department of Mental Health and Addiction Services. A total shortfall of $29.95 million is
projected with $11.0 million in Personal Services which is likely to require deficiency
appropriations in addition to release of the remaining $7.6 million withheld in order to achieve
the “Reflect Historic Staffing” lapse, $8.5 million in the Other Expenses account as a result of
higher than anticipated food, utilities and maintenance costs, $8.0 million in the Professional
Services account due to the cost of contracted doctors and nurses, $2.1 million in the Behavioral
Health Medications account due to price increases for medications, and $350,000 in the Discharge
and Diversion Services account due to unanticipated costs associated with discharges from
Connecticut Valley Hospital and Whiting Forensic Institute.
• Department of Social Services. A net shortfall of $228.6 million is anticipated. A $240.0 million
deficit is forecast in the Medicaid account due to higher than budgeted costs. The Governor’s
proposed budget had recognized additional costs in Medicaid of $106.8 million in FY 2025. Since
that time, costs have continued to increase, exceeding budgeted amounts. The HUSKY B account
is projected to lapse $10 million due mainly to the enacted budget funding the costs for coverage
of undocumented children entirely under HUSKY B when the vast majority of the costs are being
charged to Medicaid. Shortfalls of $2.8 million and $4.0 million, respectively, are forecast in the
Aid to the Disabled and State Administered General Assistance accounts due to higher caseload
and costs per case than had been budgeted. These shortfalls are partially offset by lapses of $2.0
million in Personal Services; $500,000 in Community Services; $4.3 million in Temporary Family
Assistance and $190,000 in Old Age Assistance, primarily due to lower caseloads than had been
budgeted; and $1.2 million in the state-funded home care program due to revised requirements
under the ARPA HCBS reinvestment plan.
• Technical Education and Career System. A total shortfall of $15.9 million is forecast including $3.0
million in Personal Services as well as $12.9 million in the Other Expenses account as a result of
increased costs for utilities as well as unbudgeted increases in special education services, a portion
of which was previously funded via expiring federal grants.
• Office of Early Childhood. A net shortfall of $300,000 is anticipated with a $1.4 million shortfall in
the Birth to Three account as a result of increased caseload projections which is partially offset by
forecasted lapses of $450,000 in the Personal Services account and $650,000 in the Early Care and
Education account based on current trends.
• Teachers’ Retirement Board. A net shortfall of $8.9 million is anticipated, based on a $9.9 million
shortfall in the Retiree Health account due to significant increases in contractual Medicare
Advantage rates beginning January 1, 2025, in part driven by changes mandated under the federal

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 Inflation Reduction Act. Partially offsetting this shortfall is a $1.0 million lapse in the Municipal
Retiree Health Insurance Costs account as a result of caseload.
• Department of Correction. A net shortfall of $27.7 million is forecast, with $4.0 million in Personal
Services, $16.0 million in the Other Expenses account due to inflation-driven increases in
operating expenses, and $12.0 million in the Inmate Medical account due to increased staffing
and pharmaceutical costs. Partially offsetting this shortfall are forecast lapses of $1.3 million in
the Board of Pardons and Paroles account and $3.0 million in the Community Services account.
• Judicial Department. A $8.8 million shortfall is projected with $3.9 million in the Personal Services
account and $4.9 million in the Other Expenses account, primarily caused by higher-than-
expected utilities and information technology costs.
• Public Defender Services Commission. A net shortfall of $1.14 million is anticipated based on a
$1.84 million shortfall in Personal Services which is partially offset by a $700,000 lapse in the
Assigned Counsel-Criminal account.
• State Comptroller – Miscellaneous. We estimate $9.0 million in expenditures for Adjudicated
Claims. No appropriation was made in the enacted budget for payment of these claims.
• State Comptroller – Fringe Benefits. A net shortfall of $102.4 million is anticipated, with $75.0
million forecast in the Higher Education Alternative Retirement System account primarily due to
a change in the accounting treatment for these expenditures, which were originally budgeted as
revenue reimbursements but instead will be reflected as expenditures. In addition, a $37.4 million
shortfall is forecast in the Retired State Employees Health Service Cost account, a $16.4 million
shortfall is forecast in the Other Post Employment Benefits account, a $7.5 million shortfall is
projected in the Employers Social Security Tax account, and a shortfall of $38,400 is forecast in
the Pensions and Retirements – Other Statutory account. Partially offsetting those amounts are
forecast lapses of $22.0 million in the State Employees Health Service account, $8.0 million in the
SERS Defined Contribution Match account, $2.18 million in the State Employees Retirement
Contributions account, $1.0 million in the Unemployment Compensation account, and $750,000
in the Insurance – Group Life account.

Lapses: P.A. 23-204 included bottom-line savings targets totaling $182.7 million. We project that
aggregate lapses will total $238.4 million including $114.9 million remaining in funds withheld from
agencies as part of the rollout of the FY 2025 budget, $48.7 million in budgeted unallocated lapse, of which
$8.14 million has been assigned to the constituent units of higher education with the remainder
anticipated to be achieved as agencies work to reduce spending to ensure this savings target is satisfied;
and $74.8 million in additional lapses in agencies as identified below.
• Office of Legislative Management. A $5.0 million lapse is projected in the Personal Services
account.
• Auditors of Public Accounts. A $150,000 lapse is projected in the Personal Services account.
• Commission on Women, Children, Seniors, Equity, and Opportunity. A $150,000 lapse is projected
in the Personal Services account.
• Secretary of the State. A $500,000 lapse is projected in the Personal Services account.
• Elections Enforcement Commission. A $400,000 lapse is forecast due to lower than budgeted
Personal Services costs.
• Freedom of Information Commission. A $300,000 lapse is forecast due to lower than budgeted
Personal Services costs.
• State Treasurer. A $300,000 lapse is forecast due to lower than budgeted Personal Services costs.
• Office of Governmental Accountability. A $200,000 lapse is projected in the Personal Services
account.
• Office of Policy and Management. A $2.5 million lapse is forecast with $2.0 million in the Personal
Services account and $500,000 in the Other Expenses account.

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• Division of Criminal Justice. A net lapse of $227,000 is forecast based on an anticipated $1.4
million lapse in Other Expenses which is partially offset by forecast shortfalls of $1.03 million in
the Personal Services account and $136,000 in the Witness Protection account.
• Department of Emergency Services and Public Protection. A $500,000 lapse is forecast in the
Personal Services account.
• Department of Consumer Protection. A $750,000 lapse is forecast in the Personal Services
account.
• Department of Agriculture. A total lapse of $350,000 is forecast, with $100,000 in the Personal
Services account, $150,000 in the Senior Food Vouchers account, and $100,000 in the WIC Coupon
Program for Fresh Produce account.
• Department of Economic and Community Development. A $500,000 lapse is forecast in the
Various Grants account.
• Department of Public Health. A net lapse of $1.7 million is forecast with $2.5 million in the Gun
Violence Prevention account based on contract timing which is partially offset by an $800,000
shortfall in the Personal Services account.
• Department of Developmental Services. A lapse of $2.17 million is anticipated with $2.0 million in
the Personal Services account and $170,000 in the Supplemental Services for Medical Services
account based on census.
• Department of Aging and Disability Services. A net lapse of $350,000 is projected based on current
spending patterns, with $150,000 in the Other Expenses account as a result of a budgeted lease
being paid by a different agency, $100,000 in the Educational Aid for Children - Blind or Visually
Impaired account, $150,000 in the Employment Opportunities – Blind & Disabled account, and
$100,000 in the Special Training for the Deaf Blind account. Partially offsetting these lapses in a
projected $150,000 shortfall in the Personal Services account.
• Department of Education. A net lapse of $1.42 million is forecast, with $1.0 million in the Other
Expenses account and $2.0 million in the Aspiring Educators Diversity Scholarship account based
on application volume. Partially offsetting these lapses are forecast shortfalls of $700,000 in the
Personal Services account and $876,000 in the Adult Education account based on preliminary
enrollment figures.
• Office of Higher Education. A $100,000 lapse is forecast in the Personal Services account.
• Department of Children and Families. A net lapse of $5.5 million is anticipated, with $1.0 million
in the Personal Services account, $1.8 million across the Board and Care for Children – Adoption,
Foster, and Short-term and Residential accounts, and $4.2 million in the Juvenile Review Boards
account based on timing of contracts. Partially offsetting these lapses is a projected $1.5 million
shortfall in the Other Expenses account.
• Debt Service – State Treasurer. A total lapse of $50.59 million is anticipated, with $37.0 million in
the Debt Service appropriation and $12.2 million in the UConn 2000 - Debt Service account as a
result of reduced interest payments compared to budgeted estimates and $1.39 million in the
Municipal Restructuring account as a result of the Fall 2023 refunding sale.
• Workers’ Compensation Claims – Department of Administrative Services. A net lapse of $470,000
is anticipated, with shortfalls in the DESPP and DOC line items more than offset by forecast lapses
in the remaining accounts.

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 FY 2025 - SPECIAL TRANSPORTATION FUND
The adopted budget anticipated a $68.1 million balance from operations. OPM estimates that the Special
Transportation Fund will end the year with an operating surplus of $149.0 million, and that the
Transportation Fund balance on June 30, 2025, after transfers to reduce indebtedness pursuant to section
124 of P.A. 24-151, will be $560.6 million, or 24.5 percent of current year appropriations.

Projected revenues are $1.8 million above the level anticipated in the enacted budget for FY 2025,
reflective of the November 12, 2024 consensus revenue forecast. Highway Use Tax is anticipated to be
$33.3 million below budget and more in line with FY 2024 performance. Oil Companies Tax has been
revised downward by $20.5 million due to lower than anticipated oil prices. Offsetting these declines is
Motor Vehicle Receipts, up $25.2 million, continuing a trend from FY 2024 in overperformance. In
addition, Interest Income is $12.6 million above budget, reflective of higher interest earnings in the fund.
All other changes net to a positive $17.8 million.

Projected expenditures are anticipated to be $79.1 million below the level in the adopted budget as
described below.
Deficiencies:
• Workers’ Compensation Claims – Department of Administrative Services. A $2.0 million shortfall
is anticipated based on current expenditure trends.

Lapses: We project the following lapses, totaling $94.5 million, will more than satisfy the budgeted
bottom-line savings target.
• Department of Administrative Services. A $400,000 lapse is projected in the Personal Services
account.
• Department of Motor Vehicles. A total lapse of $10.0 million is forecast, with $8.0 million in the
Personal Services account and $2.0 million in the DMV Modernization account.
• Department of Energy and Environmental Protection. A $10.0 million lapse is forecast in the Other
Expenses account as a result of a budgeted commercial electric vehicle voucher program which is
not anticipated to begin this year.
• Department of Transportation. A $12.5 million lapse is projected in the Personal Services account.
• Debt Service – State Treasurer. A $60.0 million lapse is anticipated as a result of debt cost savings
with the Fall 2024 sale and from savings achieved by the payoff of outstanding debt from the
cumulative balance.

FY 2025 - SPECIAL TRANSPORTATION FUND

(in millions)

OPM Variance
Budget Estimate from
Plan 11/20/2024 Budget
Revenues $ 2,354.5 $ 2,356.3 $ 1.8
Expenditures 2,286.4 2,207.3 (79.1)
Operating Results - Surplus/(Deficit) $ 68.1 $ 149.0 $ 80.9

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 FY 2025 - BUDGET RESERVE FUND
The state’s reserves at the close of FY 2024 were $5.04 billion. We project that, after transfers out of the
fund and into the State Employees and Teachers’ Retirement Systems totaling $933 million pursuant to
the close-out of FY 2024 and transfers into the fund pursuant to the statutory volatility cap and the
estimated FY 2025 operating surplus, the fund balance at the end of FY 2025 will be approximately $5.70
billion, or 25.0 percent of net General Fund appropriations for FY 2025. Since this projected balance is
likely to exceed the statutory 18 percent cap for the Budget Reserve Fund next fiscal year, additional
transfers to the State Employees Retirement Fund and/or the Teachers’ Retirement Fund are expected
during the close-out period for FY 2025.

The long-term outlook for the Budget Reserve Fund is discussed on page 49.

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 OUTLOOK FOR FISCAL YEAR 2026 THROUGH FISCAL YEAR 2028
BACKGROUND AND METHODOLOGY
Section 2-36b of the Connecticut General Statutes requires the Office of Policy and Management and the
Office of Fiscal Analysis to annually analyze the state’s expenditure and revenue situation for the current
biennium and the three succeeding fiscal years, and to report those analyses to the Appropriations
Committee and to the Finance, Revenue and Bonding Committee. By statute, there are seven components
of the report:

1. The level of spending changes from current year spending allowed by consensus revenue estimates
in each fund, any changes to current year spending necessary because of “fixed cost drivers,” and the
total change to current year spending required to accommodate fixed cost drivers without exceeding
current revenue estimates. The law specifies that “fixed cost drivers” may include debt service,
pension contributions, retiree health care, entitlement programs, and federal mandate costs;
2. Projected tax credits to be used in the current biennium and the next ensuing three fiscal years, and
the assumptions on which such projections are based;
3. A summary of any estimated deficiencies in the current fiscal year, the reasons for such deficiencies,
and the assumptions upon which such estimates are based;
4. Projected balance in the Budget Reserve Fund at the end of each uncompleted fiscal year of the
current biennium and the next ensuing three fiscal years;
5. Projected bond authorizations, allocations and issuances in each of the next ensuing five fiscal years
and their impact on the debt service of the major funds of the state;
6. An analysis of revenue and expenditure trends and of the major cost drivers affecting state spending,
including identification of any areas of concern and efforts undertaken to address such areas,
including, but not limited to, efforts to obtain federal funds; and
7. An analysis of possible uses of surplus funds, including, but not limited to, the Budget Reserve Fund,
debt retirement and funding of pension liabilities.

Each of the topic areas identified in statute is addressed in the pages that follow.

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 FY 2026 TO FY 2028 - GENERAL FUND OUTLOOK
Pursuant to Section 2-36b of the Connecticut General Statutes, this report compares year-over-year
revenue growth to growth in fixed costs. Revenues are derived from the November 12, 2024 consensus
forecast, and are explained later in this document. OPM’s approach for estimating “fixed costs” is
explained in more detail below. Zero denotes no change in estimated cost during the period shown.

OPM’s estimates of “fixed cost drivers” in the General Fund are as follows:

PROJECTED GROWTH IN EXPENDITURES

FIXED COST DRIVERS
(FY 2026 - 2028 Amounts Represent Year Over Year Change)

FY 2025 FY 2026 FY 2027 FY 2028

Es ti ma ted Increase over Increase over Increase over
Expendi tures FY 2025 FY 2026 FY 2027
DDS - Communi ty Res i denti a l Servi ces $ 817,878,388 $ 45,528,516 $ 9,308,196 $ 13,954,522
DMHAS - Beha vi ora l Hea l th Recovery Servi ces 26,407,864 256,000 282,000 321,484
DMHAS - Medi ca i d Adul t Reha bi l i ta ti on Opti on 4,419,683 - - -
DSS - HUSKY B Progra m 28,230,000 8,090,000 2,080,000 1,890,000
DSS - Medi ca i d 3,528,575,734 167,264,266 154,260,000 156,770,000
DSS - Ol d Age As s i s ta nce 51,156,541 2,593,459 2,390,000 2,420,000
DSS - Ai d To The Bl i nd 619,721 (2,921) 30,100 35,600
DSS - Ai d To The Di s a bl ed 53,343,338 1,926,662 2,160,000 2,490,000
DSS - Tempora ry Fa mi l y As s i s ta nce - TANF 65,341,000 7,459,000 6,400,000 4,090,000
DSS - Connecti cut Home Ca re Progra m 45,520,000 820,000 1,280,000 1,430,000
DSS - Sta te Admi ni s tered Genera l As s i s ta nce 18,710,000 1,460,000 1,220,000 900,000
DSS - Hos pi ta l Suppl ementa l Pa yments 568,300,000 - - -
OEC - Bi rth to Three 34,693,626 (1,400,000) - -
OEC - Ca re4Ki ds TANF/CCDF 112,827,096 38,400,000 - -
TRB - Reti rement Contri buti ons 1,601,407,000 53,714,000 49,979,000 (30,700,000)
TRB - Reti rees Hea l th Servi ce Cos t 25,930,802 13,412,198 5,013,000 1,197,612
TRB - Muni ci pa l Reti ree Hea l th Ins ura nce Cos ts 8,840,000 - - -
DCF - No Nexus Speci a l Educa ti on 2,396,390 56,250 - -
DCF - Boa rd a nd Ca re for Chi l dren - Adopti on 106,084,511 800,000 - -
DCF - Boa rd a nd Ca re for Chi l dren - Fos ter 123,021,818 500,000 - -
DCF - Boa rd a nd Ca re for Chi l dren - Short-term a nd Res i denti a l 69,128,396 1,092,298 - -
DCF - Indi vi dua l i zed Fa mi l y Supports 3,871,304 - - -
OTT - Debt Servi ce 1,920,429,015 81,785,681 99,737,300 77,849,016
OTT - UConn 2000 - Debt Servi ce 214,342,388 (5,308,526) 4,665,000 9,722,375
OTT - CHEFA Da y Ca re Securi ty 4,000,000 - - -
OTT - Pens i on Obl i ga ti on Bonds - TRB 330,190,921 (61,939,150) 16,112,687 16,895,385
OTT - Muni ci pa l Res tructuri ng 46,518,777 (392,648) 1,652,796 (3,953,203)
OSC - Adjudi ca ted Cl a i ms 9,000,000 (9,000,000) - -
OSC - Hi gher Educa ti on Al terna ti ve Reti rement Sys tem 90,396,159 5,423,741 5,749,200 2,539,228
OSC - Pens i ons a nd Reti rements - Other Sta tutory 2,227,346 135,615 70,889 73,016
OSC - Judges a nd Compens a ti on Commi s s i oners Reti rement 30,459,918 828,038 1,030,307 1,064,566
OSC - Reti red Sta te Empl oyees Hea l th Servi ce Cos t 775,399,520 175,160,980 154,217,700 29,829,011
OSC - SERS Defi ned Contri buti on Ma tch 16,500,480 2,125,164 9,187,167 6,953,203
OSC - Sta te Empl oyees Reti rement Contri buti ons - Norma l Cos t 184,272,537 11,105,699 5,808,400 6,035,599
OSC - Sta te Empl oyees Reti rement Contri buti ons - UAL 1,449,958,640 (38,801,596) (3,091,078) 3,097,745
TOTAL - GENERAL FUND $ 12,370,398,913 $ 503,092,726 $ 529,542,664 $ 304,905,159

10
Assumptions Used to Develop Growth Estimates for Fixed Costs
The FY 2026 through FY 2028 columns in the table above represent the anticipated increase in spending
versus the estimated amounts for the immediately preceding fiscal year. Note that amounts estimated
for FY 2025 exclude any appropriations carried forward from prior fiscal years. Explanations of
assumptions used to develop the forecast follow.

DEPARTMENT OF DEVELOPMENTAL SERVICES

• Community Residential Services - Reflects anticipated cost and caseload changes based on current
trends. FY 2028 cost reflects the impact of leap year.
DEPARTMENT OF MENTAL HEALTH AND ADDICTION SERVICES
• Behavioral Health Recovery Services - Reflects anticipated cost and caseload changes based on
current trends.
DEPARTMENT OF SOCIAL SERVICES
• HUSKY B Program, Medicaid, Old Age Assistance, Aid to the Blind, Aid to the Disabled, Temporary
Family Assistance, Connecticut Home Care Program, and State Administered General Assistance -
Reflect anticipated cost and caseload changes based on current trends and statutory
requirements, as well as annualization of adjustments.
OFFICE OF EARLY CHILDHOOD
• Care4Kids - Continues implementation of Family Child Care provider contract in FY 2026 as well
as reflects the annualization of costs and caseload.
TEACHERS' RETIREMENT BOARD
• Retirement Contributions – FY 2026 reflects the results of the 6/30/24 valuation. FY 2027 and 2028
reflect the estimated actuarially determined employer contributions estimated by the pension
actuary.
• Retirees Health Service Cost - Reflects medical inflation.
DEPARTMENT OF CHILDREN AND FAMILIES
• Board and Care for Children - Adoption, Foster Care, and Short-Term and Residential - Reflects
anticipated cost and caseload changes based on current trends.
DEBT SERVICE - STATE TREASURER
• Debt Service - Reflects the issuance of $1.6 billion in General Obligation bonds each year.
• UConn 2000 - Debt Service - Reflects the Treasurer’s current schedule for the issuance of UConn
2000 General Obligation bonds.
• Pension Obligation Bonds - TRB - Reflects the debt service schedule for the pension obligation
bonds issued for the Teachers’ Retirement Fund.
• Municipal Restructuring - Reflects debt service payments for the City of Hartford municipal
restructuring program.
STATE COMPTROLLER - FRINGE BENEFITS
• Higher Education Alternate Retirement System - Reflects anticipated wage inflation.
• Pension and Retirements - Other Statutory - Reflects statutory increases in pensions.
• Judges and Compensation Commissioners Retirement - Reflects the estimated actuarially
determined employer contributions.
• Retired Employee Health Service Costs - Reflects medical inflation.
• SERS Defined Contribution Match - Reflects estimates of salary increases and anticipated volume
of new employees in Tier IV.
• State Employees Retirement Contributions - Normal Cost and State Employees Retirement
Contributions - Unfunded Actuarial Liabilities - Reflect the estimated normal cost and unfunded
actuarial liability portions of the actuarially determined employer contributions (ADEC).

11
General Fund Revenue
The November 12, 2024, consensus revenue forecast shows General Fund revenues at $23.38 billion in FY
2025. The table below portrays detailed revenue estimates for each year covered by the consensus
forecast.

PROJECTED REVENUES
Consensus Revenue Forecast - November 12, 2024
(In millions)
General Fund
Taxes FY 2025 FY 2026 FY 2027 FY 2028
Personal Income - Withholding $ 8,889.1 $ 9,235.3 $ 9,597.3 $ 9,972.0
Personal Income - Estimates & Finals 3,273.5 3,273.5 3,404.4 3,540.6
Sales & Use Tax 5,103.5 5,230.9 5,359.6 5,494.1
Corporation Tax 1,560.7 1,577.1 1,595.0 1,628.9
Pass-through Entity Tax 2,059.3 2,135.0 2,215.4 2,298.7
Public Service Tax 311.9 314.4 317.2 319.9
Inheritance & Estate Tax 171.9 176.0 235.7 240.6
Insurance Companies Tax 301.7 306.1 310.6 315.3
Cigarettes Tax 244.7 232.2 220.6 209.5
Real Estate Conveyance Tax 277.6 289.5 294.0 298.5
Alcoholic Beverages Tax 78.8 79.1 79.5 79.8
Admissions & Dues Tax 39.5 40.0 40.5 40.9
Health Provider Tax 891.0 911.9 913.2 914.4
Miscellaneous Tax 21.4 21.9 21.3 21.8
Total Taxes $ 23,224.6 $ 23,822.9 $ 24,604.3 $ 25,375.0
Less Refunds of Tax (1,932.9) (1,989.4) (2,063.3) (2,137.5)
Less Earned Income Tax Credit (196.2) (199.9) (205.0) (210.3)
Less R&D Credit Exchange (7.8) (8.0) (8.3) (8.5)
Total - Taxes Less Refunds $ 21,087.7 $ 21,625.6 $ 22,327.7 $ 23,018.7

Other Revenue
Transfers-Special Revenue $ 383.4 $ 396.6 $ 406.1 $ 416.9
Indian Gaming Payments 308.6 314.4 329.4 339.7
Licenses, Permits, Fees 330.7 365.9 339.6 375.0
Sales of Commodities 18.0 18.3 18.8 19.2
Rents, Fines, Escheats 188.8 178.4 172.5 175.9
Investment Income 253.3 225.4 190.1 180.8
Miscellaneous 184.3 189.1 194.1 199.1
Less Refunds of Payments (87.2) (78.6) (80.8) (83.1)
Total - Other Revenue $ 1,579.9 $ 1,609.5 $ 1,569.8 $ 1,623.5

Other Sources
Federal Grants $ 1,966.1 $ 1,876.0 $ 1,895.9 $ 1,916.6
Transfer From Tobacco Settlement 109.4 95.9 94.3 92.8
Transfers From (To) Other Funds 40.3 (49.1) (49.2) (49.2)
Transfers to BRF - Volatility Adjustment (1,403.5) (1,278.2) (1,267.1) (1,278.8)
Transfer to Housing Trust Fund - - - -
Total - Other Sources $ 712.3 $ 644.6 $ 673.9 $ 681.4

Total - General Fund Revenues $ 23,379.9 $ 23,879.7 $ 24,571.4 $ 25,323.6

12
Economic Growth Rates for General Fund Tax Revenues
The November 12, 2024, consensus revenue forecast assumes that General Fund revenues will experience
economic growth rates ranging from 3.3 percent in FY 2025 to 3.0 percent in FY 2028. Economic growth
rates are defined as baseline revenue growth prior to any state policy changes. Absent a recession, these
growth rates remain conservative and well below growth experienced in prior economic expansions. The
-1.6 percent growth in FY 2023 was driven by the exceptional results of FY 2022 revenues that may have
been fueled by the aid to consumers from the federal government as well as state and local governments
as a result of the COVID-19 pandemic along with robust performance of the financial markets.

The table at right shows ECONOMIC GROWTH RATES OF PROJECTED TAX REVENUES
estimated growth rates As estimated by OPM based upon the November 12, 2024 consensus revenue forecast
in each tax type implied (Percentage Change Over Prior Year)
by the November 12,
General Fund
2024, consensus revenue
Taxes FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
forecast. The growth
Personal Income Tax - Withholding 6.8 5.1 4.4 3.9 3.9
rates represent changes
Personal Income Tax - Estimates & Finals 8.6 5.1 0.0 4.0 4.0
over prior year Sales & Use Tax 1.1 2.5 2.5 2.4 2.5
collections. Growth in the Corporation Tax 3.1 3.4 4.1 2.9 2.9
major tax types in each Pass-Through Entity -4.1 4.8 3.7 3.8 3.8
year of the forecast Public Service Tax -0.9 -0.1 0.8 0.9 0.9
reflect projections in tax Inheritance & Estate Tax -39.0 32.7 2.4 2.7 2.1
collections at more Insurance Companies Tax 10.0 0.5 1.5 1.5 1.5
normal, pre-pandemic Cigarettes Tax -13.4 -2.8 -5.1 -5.0 -5.0
levels as the state Real Estate Conveyance Tax -0.9 -2.4 4.3 1.6 1.5
reaches a soft landing Alcoholic Beverages Tax 0.7 -0.1 0.4 0.5 0.4
coming out of the Admissions & Dues Tax 3.3 1.5 1.3 1.3 1.0
pandemic-era full of Health Provider -1.6 0.8 5.3 0.2 0.2
financial aid from the
federal government.
13
Personal Income Tax – Withholding
Personal Income Tax
collections from
paycheck withholding
tend to be relatively
stable in non-
recessionary periods,
reflecting changes in
revenue as wages rise.
Modest wage growth
is projected during the
upcoming biennium,
and revenues are, in
turn, expected to
increase.

Personal Income Tax – Estimates and Finals Collections

The volatile estimates and finals component of the Personal Income Tax typically represents
approximately twenty-six percent of total income tax collections. Receipts from this revenue source are
highly correlated with capital gains and, as a result, collections experience wide fluctuations year-to-year
in response to market conditions and changes in federal tax policy. The graph below depicts this
correlation.

14
The current FY
2025 forecast calls
for $3,723.5
million in
estimates and
finals collections.
Through October
31, 2024, the state
has collected
$591.0 million, or
15.9 percent of the
total forecasted
amount. More
than 40 percent of
total collections
are received in
April when final
tax returns are
filed,
concentrating volatility into the last quarter of the fiscal year. In FY 2009 alone, as the recession gripped
the country, Connecticut’s estimates and finals collections fell by $904.4 million. Excluding the impact of
an enacted tax increase on millionaires at that time, estimates and finals collections fell an additional
$475.4 million in FY 2010, for a total two-year decline of about $1.4 billion, or 44.5 percent from the 2008
peak. Fiscal year 2018 was an outlier due to extraordinary collections resulting from repatriation of
offshore hedge fund income and investor behavior in anticipation of the Tax Cuts and Jobs Act of 2017. A
strong economic recovery from the COVID-19 pandemic resulted in an exceptional performance in FY
2022. Beginning in FY 2019, the state began receiving revenue from its new Pass-through Entity Tax which
was carved out of the income tax; for multi-year comparative purposes it has been included in the graphic
above. Through October 31, 2024, the state has collected $418.1 million, or 20.3 percent of the total
forecast for Pass-through Entity Tax collections. Combined, the state has received $1,009.1 million
through October 31, 2024, or 18.9 percent of the total forecasted amount for estimates and finals and
Pass-through Entity Tax collections in FY 2025.

Sales and Use Tax

Revenue from the Sales
and Use Tax is the
second largest revenue
source for the General
Fund. The forecast for
this tax projects growth
in the mid 2 percent
range over the next
several fiscal years, as
shown in the graph at
right. Each 1.0 percent
change in the Sales and
Use Tax growth rate
results in an all-funds
revenue change of
about $65 million.
15
Examining the Impact of Prior Recessions on Connecticut’s Projected General Fund Revenues

Stress Test of General Fund Revenue Forecast in a

Recession Similar to FY 2002 - FY 2003
$27,000.0
$25,838.5
Dollar Amounts in Millions

$26,000.0
$25,157.9 2 Yr. Total:
$24,783.4 -$2,545.3
$25,000.0 -$1,267.1
-$1,278.2
$24,000.0 $23,879.7 $24,571.4
-$3,039.6
-$1,208.6 -$1,831.0
$23,000.0
$23,379.9 -$5,584.9
$22,000.0 $22,671.1 $22,740.4

$21,000.0
2025 2026 2027

Gross Revenue Revenue Net of Volatility Cap Gross Revenue, Dot.Com Scenario

Stress Test of General Fund Revenue Forecast in a

Recession Similar to FY 2009 - FY 2010
$27,000.0
$25,838.5
Dollar Amounts in Millions

$26,000.0 $25,157.9 2 Yr. Total:

$24,783.4
$25,000.0 -$1,267.1 -$2,545.3
-$1,278.2
$24,000.0 $23,879.7
$24,571.4
$23,000.0 -$2,019.1 -$5,131.8
$23,379.9 -$3,112.7
$22,000.0 -$7,677.1
$21,000.0 $21,860.6
$21,458.7
$20,000.0
2025 2026 2027

Gross Revenue Revenue Net of Volatility Cap

Gross Revenue, Great Recession Scenario

The above graph demonstrates the risk to the consensus revenue forecast in the event of an economic
downturn. Current revenue projections for the FY 2026 – FY 2027 biennium are compared to the
underlying economic growth rate of the General Fund during each of the last two major recessions: the
Dot.com Recession in FY 2002 and FY 2003 and the Great Recession in FY 2009 and FY 2010. Relative to
the November consensus revenue estimates, the analysis finds that significantly less revenue would be
available in the ensuing biennium in the event of a recession:
• In the event of a recession with the magnitude of the Dot.com Recession, $3.0 billion less revenue
would be available over the biennium. In addition, $2.5 billion in revenue subject to the volatility
cap would be foregone, for a total revenue loss of over $5.5 billion.
• In the event of a recession with the magnitude of the Great Recession, $5.1 billion less would be
available. In addition, $2.5 billion in revenue subject to the volatility cap would be foregone, for a
total revenue loss of over $7.6 billion.
16
 FY 2026 TO FY 2028 – SPECIAL TRANSPORTATION FUND OUTLOOK
OPM’s estimates of “fixed cost drivers” in the Special Transportation Fund are as follows:

PROJECTED GROWTH IN EXPENDITURES

FIXED COST DRIVERS
(FY 2026 – 2028 Amounts Represent Year Over Year Change)

FY 2025 FY 2026 FY 2027 FY 2028

Es ti ma ted Increase over Increase over Increase over
Expendi tures FY 2025 FY 2026 FY 2027
OTT - Debt Servi ce $ 887,855,745 $ 53,315,281 $ 107,782,683 $ 100,856,657
OSC - SERS Defi ned Contri buti on Ma tch 1,238,880 (11,382) 605,324 69,653
OSC - Sta te Empl oyees Reti rement Contri buti ons - Norma l Cos t 21,358,207 1,287,212 673,225 699,559
OSC - Sta te Empl oyees Reti rement Contri buti ons - UAL 149,126,804 (3,990,706) (317,914) 315,397
TOTAL - SPECIAL TRANSPORTATION FUND $ 1,059,579,636 $ 50,600,405 $ 108,743,318 $ 101,941,266

Assumptions Used to Develop Growth Estimates for Fixed Costs

The FY 2026 through FY 2028 columns in the table above represent the anticipated increase in spending
versus the estimated amounts for the immediately preceding fiscal year. Note that amounts estimated
for FY 2025 exclude any appropriations carried forward from prior fiscal years. Explanations of
assumptions used to develop the forecast follow.

DEBT SERVICE - STATE TREASURER

• Debt Service - Reflects the issuance of Special Tax Obligation Bonds in the amounts of $1.0 billion
in FY 2025, $1.3 billion in FY 2026, and $1.4 billion in FYs 2027 and 2028.

STATE COMPTROLLER - FRINGE BENEFITS

• State Employees Retirement Contributions - Normal Cost and State Employees Retirement
Contributions - Unfunded Actuarial Liabilities - Reflect the estimated normal cost and unfunded
actuarial liability portions of the actuarially determined employer contributions (ADEC). Note that
an updated valuation, as of June 30, 2024, is anticipated to be available in December 2024.

17
Special Transportation Fund Revenue
The November 12, 2024, consensus revenue forecast projects Special Transportation Fund revenues at
$2.36 billion in FY 2025. The table below shows the detailed revenue estimates.

PROJECTED REVENUES
Consensus Revenue Forecast - November 12, 2024
(In millions)
Special Transportation Fund
Taxes FY 2025 FY 2026 FY 2027 FY 2028
Motor Fuels Tax $ 510.7 $ 502.1 $ 498.4 $ 495.4
Oil Companies Tax 336.7 336.3 349.4 361.0
Sales & Use Tax 879.2 902.0 925.4 949.3
Sales Tax - DMV 117.8 118.8 120.0 121.0
Highway Use 60.8 61.7 62.6 63.4
Total Taxes $ 1,905.2 $ 1,920.9 $ 1,955.8 $ 1,990.1
Less Refunds of Taxes (11.3) (11.0) (11.4) (11.9)
Total - Taxes Less Refunds $ 1,893.9 $ 1,909.9 $ 1,944.4 $ 1,978.2

Other Sources
Motor Vehicle Receipts $ 280.6 $ 282.1 $ 283.4 $ 284.8
Licenses, Permits, Fees 133.9 134.9 137.2 138.2
Interest Income 63.6 42.0 36.5 32.1
Federal Grants 8.1 6.9 5.6 4.4
Transfers From (To) Other Funds (13.5) (5.5) (5.5) (5.5)
Less Refunds of Payments (10.3) (8.4) (8.6) (8.7)
Total - Other Sources $ 462.4 $ 452.0 $ 448.6 $ 445.3

Total - STF Revenues $ 2,356.3 $ 2,361.9 $ 2,393.0 $ 2,423.5

Economic Growth Rates for Special Transportation Fund Tax Revenues

The outlook over the next few years is mixed for the key taxes that support the Special Transportation
Fund, with several sources showing declines while revenues related to the Sales and Use Tax show growth
in the mid 2 percent range. The table below portrays estimated growth rates for the fund’s major tax
sources.

ECONOMIC GROWTH RATES

FOR PROJECTED TAX REVENUES
As Estimated by OPM Based Upon the November 12, 2024
Consensus Revenue Forecast
(Percent Change)

Special Transportation Fund

Taxes FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Motor Fuels Tax 1.3 -0.2 0.8 -0.9 -2.8
Oil Companies Tax -0.3 -6.1 -0.1 3.9 3.3
Sales and Use Tax 1.1 2.5 2.5 2.4 2.5
Sales Tax - DMV -1.5 2.1 0.8 1.0 0.8
Highway Use 0.0 0.9 1.5 1.5 1.3

18
Motor Fuels Tax
The Motor Fuels Tax
remains an important,
albeit increasingly
smaller, component
of the Special
Transportation Fund.
This revenue source
includes a 25 cents
per gallon tax on
gasoline fuel and a
52.4 cents per gallon
tax on diesel fuel, as
of July 1, 2024. (Note
that the state
suspended the
gasoline tax from April
1, 2022 through November 30, 2022 and then phased the tax back in from December 1, 2022 through
April 30, 2023.) Nominal adjusted 1 revenue growth of the Motor Fuels Tax from FY 2015 to FY 2024 was
negative 2.3 percent, equivalent to a decline of about 0.26 percent per fiscal year over the past ten years.
Growth in this revenue source is highly influenced by economic conditions, the price of motor fuels, and
the fuel economy of the existing fleet. Prior to the COVID-19 pandemic, the Motor Fuels Tax showed
positive growth as lower fuel prices increased consumer demand, but this growth trend dissipated after
restrictions were put in place to reduce the spread of the COVID-19 virus. Consumption in FY 2024 picked
up but remains below pre-pandemic peaks. Fuel consumption in FY 2025 remains relatively flat compared
to last year and lower fuel prices will be a drag on future diesel fuel tax rates through FY 2028. The
November 2024 consensus revenue forecast assumes that consumer behavior has been permanently
changed and collections will not recover to pre-pandemic expectations over the next several fiscal years.

Even without the pandemic, it has always been the assumption that the growth in motor fuels
consumption will naturally turn negative as consumer behavior changes, either due to price increases or
by increased use of alternatively powered vehicles. Since FY 2015, new revenue sources have been added
to the Special Transportation Fund in order to address this expected lack of growth and to reduce the
Special Transportation Fund’s reliance on a single slow-growing revenue source. In FY 2023, after adjusting
for the estimated revenue lost due to the gasoline tax holiday, Motor Fuels Tax revenue would have been
approximately 21.7 percent of the total revenue deposited in the Special Transportation Fund, down from
45.0 percent in FY 2010. The Sales and Use Tax has overtaken the Motor Fuels Tax to become the largest
single revenue component in the Special Transportation Fund; in FY 2024 it represented 35.0 percent of
total collections and will remain the largest single revenue source for the foreseeable future.

1
FY 2022 and FY 2023 revenue collections were adjusted to account for the gasoline tax holiday (April 1, 2022, to April 30,
2023).
19
 LONG-TERM OUTLOOK FOR THE SPECIAL TRANSPORTATION FUND
In recent years the Special Transportation Fund has shown substantial financial strength. Strong Sales and
Use Tax collections, a recovery in fuel-related taxes, and receipt of significant federal assistance have
helped to stabilize the fund and grown cumulative fund balances to nearly a billion dollars. However, those
strong fiscal results are not expected to continue in the next biennial budget and the out-years as
expenditure growth continues to outpace the growth in revenues, leading to projected operating
shortfalls in FY 2026 and beyond. Rising costs and interest rates will put pressure on the solvency of the
fund. Without the introduction of alternative financing, additional revenue, or reductions in
transportation investments, the expected increase in costs will not be sustainable.

SPECIAL TRANSPORTATION FUND - STATEMENT OF FINANCIAL CONDITION

(In Millions)

Actual & Projected Revenues FY 2024 FY 2025 FY 2026 FY 2027 FY 2028

1. Motor Fuels Tax $ 504.5 $ 510.7 $ 502.1 $ 498.4 $ 495.4
2. Sales & Use Tax 844.4 879.2 902.0 925.4 949.3
3. Sales Tax - DMV 115.3 117.8 118.8 120.0 121.0
4. Oil Companies Tax 358.6 336.7 336.3 349.4 361.0
5. Highway Use Fee 60.3 60.8 61.7 62.6 63.4
6. Motor Vehicle Receipts 278.8 280.6 282.1 283.4 284.8
7. Licenses, Permits, Fees 142.2 133.9 134.9 137.2 138.2
8. Federal Grants 9.3 8.1 6.9 5.6 4.4
9. Interest Income 87.2 63.6 42.0 36.5 32.1
10. Transfers from / (to) Other Funds 32.2 (13.5) (5.5) (5.5) (5.5)
11. Total Revenues $2,432.8 $2,377.9 $ 2,381.3 $ 2,413.0 $ 2,444.1
12. Refunds (22.2) (21.6) (19.4) (20.0) (20.6)
13. Total Net Revenues $2,410.6 $2,356.3 $ 2,361.9 $ 2,393.0 $ 2,423.5
14. Revenue Cap Adjustment - - (29.5) (29.9) (30.3)
15. Budget Revenues $2,410.6 $2,356.3 $ 2,332.4 $ 2,363.1 $ 2,393.2
Projected Debt Service and Expenditures
16. Projected Debt Service on the Bonds $ 863.0 $ 887.9 $ 941.2 $ 1,049.0 $ 1,149.8
17. DOT Budgeted Expenses 861.0 942.1 1,032.9 1,079.4 1,127.2
18. DMV Budgeted Expenses 75.0 68.9 74.0 77.2 80.5
19. Other Budget Expenses 300.9 290.4 315.4 334.6 339.3
20. Program Costs Paid from Current Operations 18.0 18.0 18.5 19.0 19.4
21. Estimated Unallocated Lapses 0.0 0.0 (12.0) (12.0) (12.0)
22. Total Expenditures $2,117.8 $2,207.3 $ 2,370.0 $ 2,547.2 $ 2,704.2
23. Excess (Deficiency) $ 292.8 $ 149.0 $ (37.6) $ (184.1) $ (311.0)

24. Revised Cumulative Excess (Deficiency) $ 972.0 $ 594.1 $ 586.0 $ 431.8 $ 151.1
25. Use of Excess to Pay Down Outstanding Debt (526.9) 0.0 0.0 0.0 0.0
26. Remaining Cumulative Excess (Deficiency) $ 445.1 $ 594.1 $ 586.0 $ 431.8 $ 151.1

27. Debt Service Coverage Ratio 2.79 2.65 2.51 2.28 2.11

20
 CONNECTICUT’S ECONOMY
Prior to the onset of the COVID-19 pandemic-induced recession, Connecticut’s economy had not fully
recovered from the Great Recession of 2008. After contracting sharply in the 2008 recession, the
Connecticut economy experienced slow job growth before reaching full recovery in May 2018 of all
private-sector jobs lost during the 2008 recession. Although the number of Connecticut jobs was growing
and had recovered 81.4 percent of all jobs as of February 2020, the coronavirus pandemic and the ensuing
nonessential business closures caused a shift in the employment trajectory. At the outset of the pandemic,
March and April of 2020, Connecticut lost 291,100 jobs or 17.1 percent of its workforce as seen in the
graph below. The state recovered all of the jobs lost as a result of the pandemic in approximately 38
months from May 2020 to June 2023. As of September 2024, employment levels continue to rise where
total jobs are 0.7 percent greater than levels attained right before the pandemic.

The graphic below shows job losses by sector from the February 2020 peak through the end of April 2020,
followed by the subsequent gains by sector from May 2020 through September 2024. The industry most
affected by the pandemic-related job losses is leisure and hospitability, shedding a total of 91,700 jobs in
March and April 2020. As of September 2024, 88,700 jobs have been added back in that sector. The
following sectors have recovered and surpassed all the jobs lost during the pandemic: education & health,
professional & business, construction & mining, transportation & warehousing, and wholesale trade.

21
Employment recovery from the pandemic- Job Recovery by CT Labor Market Area
induced-recession varies by region from an From Pre-Pandemic (Feb. 2020) to Sept. 2024
80.0 percent recovery rate in the Enfield labor Current
market area to a 99.5 percent recovery rate Employment
in the Hartford area. The New Haven, Percentage Levels as a
Danbury, Bridgeport-Stamford-Norwalk,
of Jobs Lost Percentage
Danielson/Northeast, Torrington/Northwest,
Labor Market Area Recovered of Feb. 2020
and Waterbury areas have recovered all the
Hartford 99.5% 99.9%
jobs lost from the pandemic. Connecticut’s
New Haven 125.3% 103.9%
unemployment rate in September 2024 was
Danbury 114.6% 102.8%
at 3.2 percent compared to 4.1 percent
Bridgeport-Stamford-Norwalk 107.1% 101.3%
nationally.
Danielson/Northeast 108.3% 101.1%
Norwich-New London-Westerly 93.3% 98.2%
Torrington/Northwest 127.7% 104.0%
Waterbury 100.0% 100.0%
Enfield 80.0% 96.8%
Connecticut 104.0% 100.7%
Source: CT Dept. of La bor

22
The graph below provides a comparison of Connecticut to the nation and our neighboring states on post-
pandemic jobs recovered. All of Connecticut’s neighboring states, except Massachusetts, have recovered
all of the jobs lost from the pandemic. The state’s recovery is mostly in line with our neighboring states,
with the exception of New Jersey, but lags the nation as a whole, reaching 100.7 percent of the pre-
pandemic job levels.

23
Housing
Total home sales in Connecticut remain below their peak prior to the Great Recession. Home purchasing
activity ticked up during the early part of the COVID 19 pandemic, with approximately 45,000 homes sold
in calendar year 2021, the highest level of activity since calendar year 2007. Since that period, home sales
have decreased to approximately 28,000 as of calendar year 2023, their lowest level since 1982, when our
nation was experiencing a recession and extraordinarily high interest rates. Constrained supply and higher
interest rates have had a cooling effect on total home sales. As a result, existing homeowners may be
“locked in” to their existing mortgage rates. According to data from Freddie Mac, more than six out of ten
mortgages have rates below 4 percent.

Amid constrained supply, home prices in Connecticut and the nation continue to increase. The median
sale price on existing homes in Connecticut reached $439,254 in 2023, up from $401,404 in 2022. From
2020 to 2023, the median sale price in Connecticut increased by 43 percent. In addition, mortgage rates
increased over the same period, from an average of 3.11 percent in 2020 to 6.81 percent in 2023 based
on data from the Federal Reserve.

24
Gross State Product and Population
Connecticut’s real gross state product (GSP), a measure of all goods and services produced in Connecticut,
fell 9.1 percent during the 2008 Great Recession. As seen below, Connecticut’s real GSP began to reach
levels just prior to the 2008 Great Recession in calendar years 2017 to 2019 but decreased by 11.8 percent
between the fourth quarter of calendar year 2019 and the second quarter of calendar year 2020 due to
the onset of the pandemic-induced recession. In the third quarter of calendar year 2022, Connecticut
returned to real GSP levels attained in the fourth quarter of calendar year 2019 and has remained above
pre-pandemic levels since then. Connecticut’s total population fell by 0.2 percent between calendar years
2014 and 2019. Connecticut’s population has since increased by approximately 0.3 percent from calendar
year 2019 to calendar year 2023.

25
Source: S&P Global & HIS Markit as of 11/14/2024
The first table below compares Connecticut’s growth since the 2008 recession to states in the region and
to the national average through calendar year 2020. In essentially all indicators, Connecticut was the
slowest or one of the slowest in growth before the onset of the 2020 recession. The second table below
compares the growth since the COVID-19 pandemic. Although Connecticut’s growth has lagged
neighboring states leading up to the pandemic, Connecticut’s growth since the pandemic has been
virtually in line with neighboring states, indicating a strong recovery compared to the last economic
downturn.

Growth in Various Economic Indicators (2010 to 2020)

Employment Population Home Sales Home Prices Real GSP
Connecticut -2.9% 0.1% 16.9% 11.5% -2.3%
Maine 0.7% 2.9% 35.8% 42.9% 12.4%
Massachusetts 5.6% 6.5% 18.3% 48.4% 21.1%
New Hampshire 2.9% 4.7% 37.9% 45.7% 14.0%
New Jersey 0.2% 5.2% 44.7% 20.5% 7.7%
New York 3.1% 3.3% 13.9% 31.6% 15.7%
Rhode Island 0.0% 3.9% 33.5% 42.3% 3.9%
Vermont -3.7% 2.7% 30.3% 27.1% 4.4%
United States 8.7% 7.1% 34.7% 57.2% 20.4%
Sources: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, IHS Markit, S&P Global

Growth in Various Economic Indicators (2020 to 2023)

Employment Population Home Sales Home Prices Real GSP
Connecticut 7.9% 0.9% -33.3% 43.0% 9.9%
Maine 8.7% 2.2% -34.8% 53.9% 11.5%
Massachusetts 9.2% 0.1% -33.0% 35.5% 10.0%
New Hampshire 9.3% 1.6% -23.9% 47.8% 12.4%
New Jersey 12.3% 0.2% -28.0% 42.4% 11.2%
New York 10.2% -2.6% -25.7% 37.1% 8.1%
Rhode Island 9.4% 0.0% -34.1% 44.9% 8.7%
Vermont 7.9% 0.6% -34.0% 48.7% 9.3%
United States 9.9% 1.1% -27.2% 37.6% 11.9%
Sources: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, IHS Markit, S&P Global

26
State Migration Trends
The U.S. Census Bureau publishes,
typically annually, state-to-state State-to-State Migration From/To Connecticut - CY 2023
migration data based on the American
OUT IN NET
Community Survey, however data
New York -15,165 +28,181 +13,016
issues identified by the Census Bureau Florida -15,743 +7,435 -8,308
in the 2022 report suggest that last North Carolina -4,284 +1,220 -3,064
year’s survey results are not reliable. Massachusetts -10,437 +13,428 +2,991
This year’s updated census report Rhode Island -1,324 +4,299 +2,975
reflects positive net migration into New Jersey -2,483 +5,379 +2,896
Connecticut from other states, with a California -3,113 +4,972 +1,859
net in-migration from the 50 states Colorado -1,875 +591 -1,284
and the District of Columbia totaling Pennsylvania -3,619 +4,858 +1,239
an estimated +3,606 during 2023. Virginia -3,179 +1,947 -1,232
While this is well below the dramatic Vermont -1,655 +557 -1,098
All Other States -28,507 +22,123 -6,384
increase reported in last year’s
uncorrected report, the state is
TOTAL - All States (91,384) 94,990 +3,606
continuing to experience the positive
migration trend that began at the start Source: U.S. Census Bureau, American Community Survey
of this decade. The most significant
states contributing to this net in-migration were New York (+13,016), Massachusetts (+2,991), Rhode
Island (+2,975), New Jersey (+2,896), and California (+1,859). The most significant destinations for net out-
migration were Florida (-8,308) and North Carolina (-3,064). We also note that while the survey does not
measure emigration out of the United States, 27,608 individuals were estimated to have migrated to
Connecticut from abroad.

Inflation and Federal Interest Rates

For almost three years now, rapidly rising prices and the Federal Reserve’s policy response to that
phenomenon has dominated the headlines. Inflation at the consumer level began its upward slope as the
nation began to emerge from the pandemic-induced recession, reaching 8.99 percent in June 2022.
Obviously concerned, in March of 2022 the Federal Reserve embarked on a series of eleven interest rate
increases totaling 525 basis points. Federal interest rates remained at 5.25 percent for approximately 14
months until the Federal Reserve cut the rate by 50 basis points in September 2024 and another 25 basis
points in November 2024. The federal funds rate currently stands at a range of 4.5 percent to 4.75 percent.
It is expected that the Federal Reserve will continue to cut these short-term interest rates over the next
several years considering inflation has cooled off to the target level in the mid-two percent range. Short-
term interest rates remain elevated but have decreased slightly in the last couple months, and inflation
has since declined from 8.99 percent in June 2022 to 2.58 percent in October 2024. It appears that the
Federal Reserve’s actions have been curbing high inflation levels, however, fears that the high interest
rates might potentially induce an economic contraction still linger.

27
Source: Bureau of Labor Statistics as of 11/13/2024

Source: Federal Reserve Bank of New York as of 11/13/2024

28
 SPECIAL TOPICS
FISCAL GUARDRAILS
The 2017 and 2018 legislative sessions saw enactment of several caps and limitations that impact
budgeting. These measures include adoption of definitions that gave effect to the constitutional spending
cap, a limitation on how much revenue can be appropriated, and a measure that directs above-average
collections from volatile revenue sources to the Budget Reserve Fund. A brief description of the caps and
limitations follows.

Spending Cap
The state’s constitutional and statutory “spending” or “expenditure” cap is, in reality, a limit on the
amount of appropriations the General Assembly can authorize in a given year. The cap limits growth in
“general budget expenditures” to the greater of the average five-year increase in personal income or the
increase in inflation. 2

Given the state’s low

growth in personal
income emerging from
the 2008 recession, the
core consumer price
index was the limiting
factor in FY 2018 and FY
2019. Personal income
was the limiting factor
in FY 2020 through FY
2022. The growth in
spending for FY 2023
and FY 2024 was limited
by the growth in
inflation before
returning to growth
limited by personal
income in FY 2025. As of
November 2024, the
growth in spending is projected to again be limited by the growth in personal income for FY 2026 through
FY 2028. This growth will be calculated again during the January 2025 consensus forecast for the FY 2026
– FY 2027 biennial budget. Although no midterm appropriation adjustments were adopted for FY 2025, a
deficiency bill was adopted for FY 2024, leaving $0.5 million of room under the cap in FY 2024 and
approximately $163 million of room under the cap in FY 2025. The growth rate in FY 2025 was revised to
3.96 percent and allowed capped expenditures to grow by approximately $739.6 million over FY 2024
levels.

2
"Increase in personal income" is defined as the compound annual growth rate of personal income in the state over the preceding
five calendar years. "Increase in inflation" is defined as the increase in the consumer price index for all urban consumers, all items
less food and energy, during the preceding calendar year. "General budget expenditures" are defined as expenditures from all
appropriated funds, excluding the following: debt service; deposits to the Budget Reserve Fund; expenditures of federal funds;
federally mandated or court-ordered expenditures (in their first year); expenditures for federal programs for which the state
receives federal matching funds (in their first year); payment of the unfunded liability for the state employee and judicial
retirement systems through FY 2022; and payment of the unfunded liability for teachers through FY 2026.
29
Revenue Cap
Public Act 17-2 of the June Special Session, as amended by section 16 of Appropriations
Public Act 23-1, introduced a revenue cap that limits the amount of Fiscal as % of
General Fund and Special Transportation Fund appropriations to a Year Revenues
percentage of revenue for those funds. The appropriations limit began at 2020 99.50%
99.5 percent of estimated revenue in FY 2020 and phases down to 98.75 2021 99.25%
percent for FY 2023 and thereafter. Any resulting unappropriated General 2022 99.00%
Fund operating margin will help increase the rainy day fund and will also
2023
provide a buffer against drastic expenditure reductions and tax increases 98.75%
& thereafter
if there is a sudden mid-year downturn in the economy.

Revenue Volatility Cap

The revenue volatility cap directs any collections from the estimated and Revenue
finals component of the Personal Income Tax plus the Pass-through Entity Volatility
Tax that in total exceed a designated threshold (adjusted for personal
Threshold
income growth) to the Budget Reserve Fund. The transfer threshold is
indexed to the five-year compound annual growth rate in personal income Fiscal Year (in millions)
and is estimated as shown in the table at right. See page 49 for a discussion 2018 $3,150.0
of the Budget Reserve Fund. 2019 $3,196.8
2020 $3,294.2
2021 $3,404.9
2022 $3,505.7
2023 $3,632.5
2024 $3,779.9
2025 $3,929.3
2026 (proj.) $4,130.3
2027 (proj.) $4,352.7
2028 (proj.) $4,560.5

30
 LONG-TERM LIABILITIES
The long-term liabilities facing the state include obligations to fully fund the State Employees Retirement
System and the Teachers’ Retirement System, pay for other post-employment benefits (OPEB), retire
outstanding debt service costs, and close the cumulative GAAP deficit. The state’s current long-term
obligations total $78.9 billion, down $2.7 billion from the level reported last year and down $16.5 billion
from the level reported in the November 2021 Fiscal Accountability Report. It should be noted that an
updated valuation for the State Employees Retirement System is anticipated prior to the end of 2024. The
table below depicts the components of these long-term liabilities, and a discussion of each follows.

LONG-TERM OBLIGATIONS
(in billions)

Bonded Indebtedness – As of 6/30/24 $ 26.0

State Employee Pensions – Unfunded as of 6/30/24 19.2
Teachers’ Pensions – Unfunded as of 6/30/24 15.9
State Employee Post-Retirement Health and Life – Net Liability as of 6/30/23 15.6
Teachers’ Post-Retirement Health and Life – Net Liability as of 6/30/22 1.6
Cumulative GAAP Deficit – As of 6/30/23 0.6
Total $ 78.9

31
 PENSIONS
The state is the sponsor of two large pension systems, one for state employees and one for teachers, as
well as a retirement plan for judges, family support magistrates and compensation commissioners.

State Employees Retirement System (SERS)

The state’s unfunded SERS obligation as of June 30, 2024 totaled $19.2 billion, a decrease of over $948
million from the prior
year. The funded ratio
increased from 52.0
percent to 55.2 percent.
The rate of return on the
market value of the plan’s
assets was 11.45 percent
for 2024, above the
assumed rate of 6.9
percent. The market value
of assets was $23.9 billion
and includes the transfer
of $513.9 million from the
General Fund for FY 2024.
The deposit transfer was
due to the Budget Reserve
Fund (BRF) exceeding the
statutory limit of 15
percent. The June 30,
2024 valuation states,
“Without these transfers,
the unfunded actuarial accrued liability would be correspondingly larger, the funded ratio would be 54.1%
and the ADEC for FYE26 would be approximately $42.8 million larger.”

As of June 30, 2024, the total SERS liability was $42.87 billion, with $19.2 billion as the unfunded portion
of that liability. Most of the liability – 77 percent – is related to already-retired employees. The pie chart
and table that follow show the proportions of liability attributable to active employees and retirees. The
overwhelming majority of the state’s contributions in FY 2026 – 88 percent – is to address the unfunded
actuarial accrued liability.

32
 SERS Liability Based on 6/30/24 Valuation ($ in Thousands)
Retired/Deferred Liability 32,925,563 76.8%
Active – Tier I Hazardous 0 0.0%
Active – Tier IB 52,852 0.1%
Active – Tier IC 1,522 0.0%
Active – Tier II Hazardous 104,240 0.2%
Active - Tier II Hybrid Plan 132,556 0.3%
Active – Tier II Others 2,460,204 5.7%
Active – Tier IIA Hazardous 2,053,787 4.8%
Active - Tier IIA Hybrid Plan 248,850 0.6%
Active – Tier IIA Others 2,999,540 7.0%
Active - Tier III Hazardous 599,698 1.4%
Active - Tier III Hybrid 61,220 0.1%
Active - Tier III Others 674,950 1.6%
Active - Tier IV Hazardous 202,241 0.5%
Active - Tier IV Hybrid 33,497 0.1%
Active - Tier IV Others 319,076 0.7%
Total Accrued Liability 42,869,799
Actuarial Value of Assets 23,683,583
Unfunded Accrued Liability 19,186,216

Normal Cost 246,515

Amortization of Unfunded Accrued Liability 1,733,888
FY 2026 Actuarially Determined Employer 1,980,404
Contribution

33
Teachers’ Retirement System (TRS)
The state’s unfunded liability in the
TRS, as of June 30, 2024, totaled $15.9
billion, a $496 million decrease from
the level reported for June 30, 2023.
As a result, the funded ratio increased
from 59.8 percent to 62.3 percent.
The market value of assets increased
$2.6 billion from the prior valuation.
This increase includes approximately
$411 million due to the BRF and
surplus deposits following FY 2024 as
well as investment returns of 11.49
percent in FY 2024, considerably
higher than the assumed rate of 6.9
percent. Partially offsetting these
funding gains was an increase in
overall liability primarily due to higher
than typical retiree COLAs based on
the change in the consumer price
index.

The following graph depicts the increase in contributions to the TRS. In FYs 2006 through 2009,
contributions were supplemented with surplus funds. In FYs 2021 through 2024, surplus funds were in
addition to the required contributions. The bars in the graph for FY 2010 and beyond include debt service
on the $2.3 billion pension obligation bonds issued on April 30, 2008, for the benefit of the Teachers’
Retirement System. Contributions grew in FYs 2018 and 2019 to reflect the impact of lowering the
assumed rate of investment return to 8 percent from 8.5 percent. In FY 2020 the assumed rate was further
reduced to 6.9 percent. The graph below also reflects the impact of the BRF deposits from FYs 2021
through 2024.

34
 PENSION STRESS TEST AND OUTLOOK
Section 4-68ee of the Connecticut General Statutes mandates that the Office of Policy and Management
annually report a stress test analyses for the State Employees Retirement System (SERS) and the Teachers
Retirement System (TRS).

The final version of this year’s report will be issued in late November 2024. The analysis utilizes the
valuations for SERS and TRS as of 6/30/2023 rolled forward one year to reflect the FY 2024 investment
returns and supplemental contributions. The report concentrates on five specific scenarios: 1.) investment
return sensitivity 2.) asset shock sensitivity 3.) contribution sensitivity 4.) inflation sensitivity (COLAs), and
5.) salary sensitivity. The results combined SERS and TRS to provide a complete, statewide assessment.
The preliminary key findings from that analysis include:

• Baseline contributions requirements are projected to remain relatively stable at the current levels
of $3.6 billion for the next 20 years until the unfunded liability is paid off in FY 2046.
• Without the recent additional deposits of $933.1 million from FY 2024, the annual contribution
plateau would have occurred around $3.7 billion and cost the state an additional $2.1 billion over
the projection period.
• Funding levels will continue to improve over time even when investments underperform if
contributions are adjusted according to the funding policy.
• Maintaining baseline contribution patterns in an asset shock scenario, which includes a significant
asset loss in FY 2025, instead of contributing the Actuarially Determined Employer Contribution
(ADEC) would lead to slower funding recovery for both SERS and TRS and persistently low
operating cash flow ratio for SERS.
• In the near term, the asset shock scenario causes contribution requirements to grow faster than
projected revenues over the next 5 years, potentially leading to budget crowd out. Increases at
TRS drive this growth, increasing 8 percent per year on average from FYs 2025-2029 under these
scenarios.

The final version of the stress test report will be available at the end of November.

The financial outlook for the pension plans has been greatly enhanced by two factors. First, changes to
both pension systems implemented several years ago have resulted in a much steadier stream of
projected contribution requirements. Second, the recent additional deposits to both plans have reduced
the anticipated required contributions.

After the accounts for the General Fund have been closed at the end of each fiscal year, the statutes
require any unappropriated General Fund surplus be deposited into the Budget Reserve Fund (BRF) until
the fund reaches an amount equal to 15 percent of net General Fund appropriations. If the BRF balance
exceeds the maximum threshold of 15 percent, the amount over the threshold is transferred to the State
Employees Retirement Fund and/or the Teachers’ Retirement Fund, but not exceeding 5 percent of the
retirement fund’s unfunded liablitiy. This allows the state to reduce its long-term obligations. With the
start of FY 2025, the BRF threshhold has increased to 18 percent. This is expected to reduce deposits to
the pension systems going forward.

For an unprecedented fifth year in a row, the BRF has exceeded the 15 percent statutory limit and
additonal deposits will be made to both SERS and TRS. The cumulative amount of deposits is $8.6 billion.
The table below details the additional deposits to the two pension funds.

35
 Surplus Additonal Additional Total Additional
Year Deposits to SERS Deposits to TRS Pension Deposits
FY 2020 $61.6 - $61.6
FY 2021 $714.7 $903.6 $1,618.3
FY 2022 $3,203.7 $903.6 $4,107.3
FY 2023 $1,046.5 $828.1 $1,874.6
FY 2024 $513.9 $419.1 $933.1
Total $5,540.5 $3,054.5 $8,595.0

The supplemental deposits into the plans have decreased the amount of time necessary to pay down the
unfunded liability by two years. Both plans are now projected to be fully funded in 2046 versus 2049 from
the report issued three years ago.
Projected Total Unfunded Accrued Liability
(in millions)
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
TRS SERS

OTHER PENSION SYSTEMS

The state sponsors other pension plans besides the State Employee Retirement System (SERS) and
Teachers’ Retirement System (TRS). The Judges, Family Support Magistrates, and Compensation
Commissioners Retirement System (JRS) is a defined benefit pension plan in which, as of June 30, 2023,
there were a total of 203 active members and 318 retirees and dependents.

Active Members Retired Lives

Group Number Type of Benefit Number
Judges 178 Retirement & Disability 239
Compensation Commissioners 16 Survivor 79
Family Support Magistrates 9 Total 318
Total 203

The JRS previously adopted some of the changes that were made to SERS and TRS, most notably a
reduction to a more realistic assumed investment rate of return of 6.9 percent. However, the JRS had not

36
adopted the layered amortization method used by SERS and TRS until very recently with the passage of
Public Act 24-81. Before passage, the Judges plan was near the end of the 40-year amortization of its
unfunded liabilities with only eight years remaining. This “single-layer” amortization approach causes
volatility in pension contributions toward the end of the amortization period because the unfunded
liability – and subsequent experience losses – would be amortized over a shorter and shorter timeframe.
As an alternative, in a layered amortization approach, each year’s actuarial experience is assigned to a
new amortization period which spreads out the effects of actuarial gains and losses. It reduces the
volatility of the amortization payment portion of the state’s required contribution, resulting in a much
steadier stream of projected contribution requirements.

SERS and TRS both utilize a 25-year amortization of plan gains and losses for each annual valuation. The
JRS adopted a 15-year amortization because its unfunded actuarial accrued liabilities are only $244 million
versus $20.1 billion for SERS and $16.4 billion for TRS. It is important to note that the switch to the 15-
year layered amortization did not extend the payments for another 15 years; it only increased the
amortization period for the unfunded liability in the plan as of 6/30/23 by seven years since there were
eight years remaining under the previous 40-year amortization period. For FY 2025, the change to 15-year
layered amortization reduced the required contributions by $14.3 million.

FY 2024 FY 2025 FY 2025

Without Layered With Layered
Amortization Amortization
Normal Cost $7,908,954 $8,833,810 $8,833,810
Accrued Liability $27,342,829 $35,933,431 $21,626,108
ADEC $35,251,783 $44,767,241 $30,459,918
ADEC Change from FY 2024 27% -13%

The state also sponsors a defined contribution 401(a) pension plan for teachers and professional staff
members at the higher education constituent units called the Alternate Retirement Plan or ARP. These
individuals have the option of choosing ARP instead of SERS or TRS. Both the employee and the state
contribute 6.5 percent of compensation to the plan (for those hired on and after July 1, 2017). Features
of ARP not found in SERS or TRS include its portability and immediate vesting. It is a low-risk pension plan
to the state because the employee, and not the state, is responsible for the investment risk and
management of the account.

Since FY 2024, the General Fund has supported 100 percent of the retirement/legacy costs of the higher
education constituent units. This means that the “legacy costs”, as well as the current normal cost of
retiree pension and healthcare benefits are budgeted in the Comptroller’s Fringe Benefits accounts in the
General Fund for all higher education employees regardless of which university fund pays their salaries.
The higher education units are financially responsible for 100 percent of the other fringe benefit-related
costs of their current employees, i.e., health costs, social security taxes, group life insurance, etc.

37
 OTHER POST-EMPLOYMENT BENEFITS (OPEB)

Other post-employment benefits

(OPEB) include non-pension $30.0
Net OPEB Liability
related benefits for retirees such
$25.0
as health care, dental coverage, $26.6
$23.5
and life insurance. Until FY 2010, $20.0 $21.7
$20.7

Billions
there was no pre-funding of $15.0 $17.9
$19.5 $18.9
$17.4 $17.3
$19.5
$16.2
future OPEB liabilities, and $15.5 $15.6

benefits were budgeted on a $10.0

“pay as you go” (PAYGO) basis, $5.0
meaning that the state
$0.0
appropriated funds sufficient to 2006 2008 2011 2012 2013 2015 2017 2018 2019 2020 2021 2022 2023
pay for anticipated OPEB costs
Fiscal Year
during the budget period. As
with pension accounting, the PAYGO approach does not capture the current value of benefits promised
during future periods, i.e., unfunded liabilities. The Governmental Accounting Standards Board (GASB)
requires states to report on the unfunded liabilities for OPEB. The most recent OPEB valuation (GASB
Statement 75 measured as of June 30, 2023) shows the net OPEB liability (NOL) at $15.6 billion, a $0.1
billion increase from the prior valuation of $15.5 billion. The NOL had been expected to increase to $15.8
billion due to normal plan operations. The difference between the actual and expected NOL is mainly due
to an investment experience gain, an actuarial experience gain, and an update to the discount rate, all of
which decreased the NOL. The decrease in the NOL would have been significantly higher if not for the
offsetting estimated impact of changes in 2025 due to the Inflation Reduction Act of 2022 (IRA) on
Medicare Advantage Prescription Drug plans. The IRA impact is predicted to increase the NOL by almost
$5.9 billion.
Other Post-Employment Benefit Trust Fund
In FY 2008, the state began the process of Summary of Contributions
setting aside funds in trust to address the OPEB (in millions)

unfunded liability. While not a full actuarial Employee State Total

Fiscal Year Contributions Contributions Contributions
funding approach, setting aside funds now 2008 - $10.0 $10.0
could begin a long-term transition to actuarial 2009 - - $0.0
pre-funding of OPEB costs. The 2009 and 2011 2010 $1.4 - $1.4
SEBAC agreements introduced employee 2011 $21.6 $14.5 $36.1
2012 $25.0 - $25.0
contributions, and now all state employees
2013 $27.5 - $27.5
contribute 3 percent to the OPEB trust fund, 2014 $45.5 - $45.5
with the state matching those employee 2015 $93.3 - $93.3
contributions. The table on the right depicts 2016 $125.2 - $125.2
OPEB contributions by both employees and the 2017 $120.8 - $120.8
2018 $116.8 $122.2 $239.0
state. As of July 31, 2024, the OPEB trust fund 2019 $116.5 $125.8 $242.3
had a market value of $2,956.0 million and was 2020 $120.6 $126.5 $247.1
the fourth largest investment fund managed by 2021 $109.1 $113.2 $222.3
the Treasurer’s Office after the State 2022 $104.5 $112.6 $217.1
Employees Retirement Fund, Teachers’ 2023 $108.6 $119.0 $227.6
2024 $67.2 $77.2 $144.4
Retirement Fund, and the Municipal 2025 est. $63.6 $76.7 $140.3
Employees Retirement Fund. The contributions Total $1,267.2 $897.7 $2,164.9
significantly decreased in FY 2024 as over Excludes investment earnings.
15,000 employees hired prior to FY 2014
completed their 10-year period of contributions.
38
 DEBT SERVICE
The graph below shows debt service as a proportion of General Fund expenditures. As a percentage of
General Fund appropriations, debt service is projected to remain level at approximately 11 percent from
FY 2025 to FY 2028. FY 2024 includes an additional debt service payment of $211.7 million for the full
repayment of the GAAP Conversion Bonds.

MEDICAID
Historically, Medicaid expenditure growth over the past decade has been affected by caseload growth
and limited rate increases, which have been mitigated in part through cost efficiencies and care
coordination efforts. To receive the enhanced federal reimbursement available under the public health
emergency, the state could not terminate coverage for most Medicaid enrollees before April 1, 2023.
Since the suspension of Medicaid eligibility discontinuances on March 18, 2020, Medicaid enrollment –
excluding the limited benefit coverage groups – increased 22 percent, from approximately 830,000 to
over 1,010,000 as of April 2023, an increase of roughly 180,000 cases. Although enrollment grew
significantly during the public health emergency, expenditures in the aggregate did not increase
proportionally due to lower utilization of medical services in many areas. Since that time, however,
enrollment remains higher than pre-pandemic levels and utilization continues to trend upward.

39
The Medicaid expansion for low-income adults, which was first approved by the federal government in
June 2010, has driven significant increases in caseload and program costs. Expenditures for this program,
now known as HUSKY D, increased from $228.7 million in FY 2010 to $769.0 million in FY 2013. The state
further expanded Medicaid coverage for low-income adults by increasing income eligibility to 138 percent
of the federal poverty level beginning January 1, 2014, resulting in significant additional growth. As a result
of this expansion, the HUSKY D caseload has grown from 46,156 in June 2010 to over 313,000 in June
2024. HUSKY D expenditures have increased from $916.6 million in FY 2014 to $2,538.7 million in FY 2024,
the majority of which was supported with enhanced federal reimbursement, which was phased down
from 100 percent in calendar years 2014 through 2016 to 90 percent in calendar year 2020 and future
years.

The graph below shows total Medicaid costs in the Department of Social Services as well as state and
federal shares of the total.

Medicaid Expenditures and Caseload

$9,316 1,200,000
$8,977
$9,000
$8,564
$8,286 1,100,000
$7,998
$8,000
$7,244 1,000,000
$7,000 $6,734
$6,436 $6,514
$5,453 900,000
$5,962 $6,095 $5,269
Expenditures (in millions)

$6,000 $5,025
$4,894
800,000
$5,061

Caseload
$5,000 $4,685
$4,280
700,000
$3,818 $3,939
$3,545 $3,571
$4,000
600,000

$3,000
500,000

$2,000 $3,863 400,000

$3,539 $3,708
$3,392
$2,937
$2,417 $2,524 $2,618 $2,575 $2,454 $2,559
$1,000 300,000

$0 200,000
'17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27
Fiscal Year Est. Fcst. Fcst.

General Fund Federal Share under Net Budgeting Caseload

Expenditures have been adjusted to include funds transferred to DSS from DMHAS for behavioral health services which qualify
for Medicaid reimbursement. Expenditures exclude hospital supplemental payments given the significant variance in that area
over the years. Caseload figures exclude the limited benefit COVID-19 testing group.
Note: For the quarters ending March 31, 2020 through March 31, 2023, General Fund requirements were reduced due to
enhanced federal reimbursement of 6.2% related to the public health emergency; this enhanced reimbursement was stepped
down for three additional quarters (through the quarter ending December 31, 2023). This enhanced reimbursement did not
apply to the Medicaid expansion population, which continued to be reimbursed at 90%.

40
The Department of Social Services is employing
Medicaid - FY 2024
diverse strategies to achieve improved health
outcomes and cost efficiencies in the Medicaid Elderly, Blind and
Disabled 8% Elderly,
program. Strategies include:
Blind and
• use of an administrative services organization Disabled
(ASO) platform to promote efficient, cost- Other 38%
effective and consumer/provider responsive Adults
56%
medical, behavioral health, and dental services;
• use of data analytics to improve care; Other
Adults
• activities designed to improve access to and use 46%
of preventive primary care;
Children
• efforts to integrate medical, behavioral health, 36% Children
long-term services and supports and social 16%
services;
• initiatives designed to “re-balance” spending on Enrollment Expenditures
Average Monthly Total Annual Expenditures
long-term services and supports (shifting from
Enrollment = 990,859 * = $8,286 million
institutional to community-based care); and
• efforts to promote the use of health Average Per Member Per Month = $697
information technology.
* Excludes the limited benefit COVID-19 testing group

In contrast to almost all other Medicaid programs across the nation, Connecticut Medicaid uses a self-
insured, managed, fee-for-service approach rather than a managed care arrangement.

Medicaid Growth Trends

11.9%
10.6% 10.4%

8.6%
7.9% 7.6%

5.3% 5.6% 5.2%

4.7% 4.6%
3.4% 3.6%
2.7%

DSS PMPM
U.S. Medicaid Spending DSS Expenditures (Gross) * DSS Enrollment
(Average)
(Average) -1.6%

FY 20 to FY 21 Change FY 21 to FY 22 Change -4.8%

FY 22 to FY 23 Change FY 23 to FY 24 Change

* Expenditures are net of drug rebates and exclude hospital supplemental payments given the significant variance in
that area over the years. Enrollment and PMPM figures exclude the limited benefit COVID-19 testing group.

41
 MUNICIPAL AID
State aid to municipalities comes from a variety of sources: appropriated funds, bond funds, revenue
intercepts, and transfers from non-appropriated funds. The table below shows major statutory aid to
municipalities.
STATE AID TO OR ON BEHALF OF LOCAL GOVERNMENTS
(in $ millions)
General Government FY 2025 FY 2026 FY 2027 FY 2028
Tiered PILOT 347.1 352.1 352.1 352.1
Motor Vehicle Tax Grants 143.9 127.5 127.5 127.5
Supplemental Revenue Sharing 74.7 74.7 74.7 74.7
Mashantucket Pequot & Mohegan Grant 52.5 52.5 52.5 52.5
Town Aid Road 60.0 60.0 60.0 60.0
LoCIP 45.0 45.0 45.0 45.0
Municipal Grants-in-Aid 91.0 91.0 91.0 91.0
Regional Performance Incentive Account 14.0 14.4 14.7 15.1
Municipal Restructuring 7.3 7.3 7.3 7.3
Municipal Restructuring: Debt Service 46.5 46.1 47.8 43.8
Misc. General Government Grants 24.7 22.9 22.9 22.9
Subtotal - General Government 906.7 893.5 895.5 891.9

Education
Adult Education 24.0 25.1 26.0 26.8
Education Cost Sharing1 2,289.2 2,453.3 2,446.4 2,439.4
Magnet Schools2 287.5 352.2 365.1 378.5
Special Education - Student Based 181.1 181.1 181.1 181.1
Local School Construction 550.0 550.0 550.0 550.0
Education Finance Reform3 145.0
Misc. K-12 Education Grants 104.2 114.9 115.0 115.1
Subtotal - Education 3,580.9 3,676.7 3,683.6 3,691.0

Fringe Benefits
TRS Retirement Contributions 1,601.4 1,655.1 1,705.1 1,674.4
TRS Retiree Health Service Cost 25.9 39.3 44.4 45.6
Municipal Retiree Health Insurance Cost 9.8 8.8 8.8 8.8
Debt Service - Pension Obligation Bonds 330.2 268.3 284.4 301.3
Subtotal - Local Teachers' Retirement 1,967.4 1,971.6 2,042.7 2,030.1

Total - Aid to Municipalities 6,455.0 6,541.8 6,621.7 6,613.0

1. For FY 2025 - An estimated $73.7 million in funding budgeted in the Education and Finance Reform account is for
Education Cost Sharing (ECS). For FY 26 on this funding is reflected in the ECS account.
2. For FY 2025 - An estimated $42.5 million in funding budgeted in the Education Finance Reform account is for Magnet
Schools. For FY 26 onward this funding is reflected in the Magnet School account.
3. For FY 2025, the Education Finance Reform figures reflect only the portion of the appropriation projected to be
expended on educational grants which are classified as municipal aid. For FY 26 onwards, the appropriation has
been distributed among various education grants in accordance with current law.

42
 STATE WORKFORCE
Executive Branch Staffing Trends
The chart below shows full-time staffing in Executive Branch agencies based on employees paid from
appropriated funding sources. After dropping from approximately 32,000 at the start of calendar year
2009, more recent staffing levels remained steady at about 26,000 between FY 2019 and FY 2021, prior
to a marked acceleration in the pace of retirements leading up to the change in COLA formula for post
7/1/2022 SERS retirees. After reaching a low point in July 2022, below 24,500 paid employees, overall
Executive Branch staffing levels have increased by nearly 3,000 employees and now stand approximately
1,500 employees above the pre-pandemic level.

43
 EFFORTS TO PRESERVE OR MAXIMIZE FEDERAL REVENUE3
The state continues to make federal revenue maximization efforts a priority. Medicaid state plan
amendments are submitted to the federal government as appropriate, while initiatives not requiring
federal approval are operationalized by impacted state agencies.

Interagency workgroups meet regularly to discuss revenue opportunities and implementation issues.
Some of the major revenue maximization and revenue retention initiatives being explored, under
development or now operational include:

• Further implementation of the substance use disorder (SUD) demonstration waiver to enhance
the state’s SUD service system and enable federal reimbursement on SUD services for individuals
that were not previously eligible under federal rules. The additional revenue continues to be
reinvested to strengthen the SUD service system by ensuring a complete array of services is
available. This allows Medicaid members with opioid use disorder and other SUDs to receive
medically necessary treatment services in the most appropriate setting. The Departments of
Social Services (DSS), Mental Health and Addiction Services (DMHAS), Children and Families (DCF),
Correction (DOC) and the Judicial Branch work collaboratively to identify anticipated needs in
each agency. The additional federal revenue generated from this initiative that has not been
allocated to the participating agencies is deposited into a reserve account to be used to meet
program requirements or fund program enhancements;
• Submission of an application to the federal Centers for Medicare & Medicaid Services (CMS) to
amend the SUD demonstration waiver to enhance services and enable federal reimbursement on
transition and re-entry services for incarcerated individuals 90 days pre-release – a population
previously precluded from Medicaid coverage under long-standing federal rules. The additional
revenue must be reinvested to strengthen inmate medical services and community-based
services to improve care transitions into the community and ultimately reduce recidivism. DSS,
DMHAS, DCF, DOC, and the Judicial Branch have worked collaboratively to develop an
implementation plan and identify anticipated needs in each agency. The additional federal
revenue generated from this initiative will be deposited into the reserve account and be
distributed to meet program requirements or fund program enhancements;
• Examination of DCF’s Family First Prevention Services Act Prevention Plan to ensure that all
eligible prevention services allowable under Title IV-E are claimed for reimbursement;
• Continued implementation of section 9817 of the American Rescue Plan Act, which allowed the
state to earn an extra 10 percent in federal reimbursement on a range of waiver and related home
and community-based services (HCBS) from April 1, 2021 through March 31, 2022. This additional
federal funding (approximately $207 million) must be reinvested in new qualifying services which
support community-based long-term services and supports over the multi-year period ending
June 30, 2025. The $207 million in new federal funding, once reinvested as the state share for
Medicaid-supported services, will leverage approximately $230 million in new federal
reimbursement to match those expenditures, resulting in total increase in expenditures of roughly
$440 million over the reinvestment period. The 10 percent HCBS match authorized in ARPA allows
the state to leverage significant federal resources over the reinvestment period, with an ongoing
cost, excluding the costs associated with the personal care attendant (PCA) collective bargaining
agreement, to the state of approximately $25 million; and
• Evaluation of ideas to generate additional revenue submitted by the agencies

3
This section fulfills the reporting requirement found in subsection (c) of Sec. 4-31d, CGS.
44
It is important to note that, while much effort goes into maximizing revenue, equal or greater effort goes
into preserving existing sources of federal reimbursement. CMS has strengthened its compliance
activities, resulting in significantly greater scrutiny of all state claims. This has meant Department of Social
Services’ staff and impacted state agencies spending significantly more time and effort explaining and
justifying revenue items to CMS to sustain claims worth hundreds of millions of dollars that had once been
considered routine.

45
 BONDING
PROJECTED BOND AUTHORIZATIONS, ALLOCATIONS AND ISSUANCES
The table below depicts projected bond authorizations, allocations and issuances through FY 2029.
FIVE YEAR BOND PROJECTIONS
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Bond Authorizations
General Obligation Bonds $ 2,372,635,451 $ 2,206,476,972 $ 2,248,678,572 $ 2,186,178,572 $ 2,188,178,572
Community Investment Fund 175,000,000 175,000,000 175,000,000 250,000,000 250,000,000
Crumbling Foundations 25,000,000 25,000,000 - - -
Connecticut Strategic Defense Investment Act 10,321,428 10,321,428 10,321,428 10,321,428 10,321,428
Connecticut Port Authority 2,500,000 5,000,000 - - -
High Poverty Low Income Census Tract 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
UCONN Research Faculty 9,220,000 4,201,600 - - -
UCONN 2000/Next Generation 122,000,000 124,000,000 116,000,000 103,500,000 101,500,000
Total General Obligation Bonds $ 2,766,676,879 $ 2,600,000,000 $ 2,600,000,000 $ 2,600,000,000 $ 2,600,000,000
Special Tax Obligation Bonds 1,642,372,000 1,500,000,000 1,500,000,000 1,500,000,000 1,500,000,000
Clean Water Fund Revenue Bonds 25,000,000 250,000,000 250,000,000 250,000,000 250,000,000
Total Bond Authorizations $ 4,434,048,879 $ 4,350,000,000 $ 4,350,000,000 $ 4,350,000,000 $ 4,350,000,000
Bond Allocations
General Obligation Bonds $ 1,900,000,000 $ 2,000,000,000 $ 2,000,000,000 $ 2,000,000,000 $ 2,000,000,000
Special Tax Obligation Bonds 1,500,000,000 1,500,000,000 1,500,000,000 1,500,000,000 1,500,000,000
Clean Water Fund Revenue Bonds 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000
Total Bond Allocations $ 3,550,000,000 $ 3,650,000,000 $ 3,650,000,000 $ 3,650,000,000 $ 3,650,000,000

FY 2025 FY 2026 FY 2027 FY 2028 FY 2029

Bond Issuance
General Obligation Bonds $ 1,600,000,000 $ 1,600,000,000 $ 1,600,000,000 $ 1,600,000,000 $ 1,600,000,000
Special Tax Obligation Bonds 1,000,000,000 1,300,000,000 1,400,000,000 1,400,000,000 1,400,000,000
Clean Water Revenue Bonds - 250,000,000 - 250,000,000 -
UCONN 2000/Next Generation - 200,000,000 200,000,000 200,000,000 150,000,000
Total Bond Issuance $ 2,600,000,000 $ 3,350,000,000 $ 3,200,000,000 $ 3,450,000,000 $ 3,150,000,000
Debt Service
General Fund $ 2,515,481,101 $ 2,529,626,458 $ 2,651,794,241 $ 2,752,307,814 $ 2,805,483,318
Transportation Fund 887,397,498 941,171,026 1,048,953,709 1,149,810,367 1,236,069,879
Total Debt Service $ 3,402,878,599 $ 3,470,797,484 $ 3,700,747,950 $ 3,902,118,181 $ 4,041,553,197

Bond Authorizations
FY 2025 are enacted bond authorizations.
FY 2026 - FY 2029 projected bond authorizations assume that authorizations continue at historical average levels.
UConn 2000/Next Generation automatic authorizations in accordance with C.G.S. Section 10a-109g.
Connecticut Strategic Defense Investment Act automatic authorizations in accordance with C.G.S. Section 32-4o.
Community Investment Fund, Crumbling Foundations, Connecticut Port Authority, High Poverty Low Opportunity,
and the UCONN Research Faculty authorizations in accordance to respective amended Public Acts.

Bond Allocations
Projected GO Bond allocations are based on budgeted debt service.
Projected GO Bond Allocations will be substantially under the C.G.S. Section 3-20(d)(2) projected fiscal year caps.
Projected Special Tax Obligation Bond allocations assume to match debt issuance levels scheduled in the out-year assumptions.

Bond Issuance
Projected GO Bond issuances are based on budgeted debt service.
Projected GO Bond issuances will be substantially under the C.G.S. Section 3-21(f)(1) projected fiscal year caps.

Allocation &
Estimated General Obligation Caps Inflation Issuance Cap
FY 2025 2.6% $ 2,515,000,000
FY 2026 2.3% $ 2,601,000,000
FY 2027 2.3% $ 2,668,000,000
FY 2028 2.3% $ 2,730,000,000
FY 2029 2.2% $ 2,792,000,000

Inflation Sources: S&P Global, Bureau of Labor Statistics

46
 STATUTORY GENERAL OBLIGATION BOND DEBT LIMIT
Section 3-21 of the General Statutes, as amended, provides that “No bonds, notes or other evidences of
indebtedness for borrowed money payable from General Fund tax receipts of the State shall be authorized
by the general assembly except such as shall not cause the aggregate amount of (1) the total amount of
bonds, notes or other evidences of indebtedness payable from General Fund tax receipts authorized by
the general assembly but which have not been issued and (2) the total amount of such indebtedness which
has been issued and remains outstanding, to exceed one and six-tenths times the total general fund tax
receipts of the State for the fiscal year in which any such authorization will become effective, as estimated
for such fiscal year by the joint standing committee of the general assembly having cognizance of finance,
revenue and bonding in accordance with section 2-35.”

Tax Incremental Financings, Special Transportation, Bradley Airport, Clean Water Fund Revenue,
Connecticut Unemployment Revenue Bonds, Economic Recovery Notes and Pension Obligation Bonds are
excluded from the calculation. Hartford Contract Assistance are included in the calculation.

In accordance with the General Statutes, the Treasurer computes the aggregate amount of indebtedness
as of January 1, and July 1 each year and certifies the results of such computation to the Governor and
the General Assembly. If the aggregate amount of indebtedness reaches 90 percent of the statutory debt
limit, the Governor is required to review each bond act for which no bonds, notes or other evidences of
indebtedness have been issued, and recommend to the General Assembly priorities for repealing
authorizations for remaining projects.

The estimated debt-incurring margins as of July 1 of each fiscal year are as follows:

FY 2025 FY 2026 FY 2027 FY 2028 FY 2029

Consensus Revenues 11/12/2024 $20,326,300,000 $21,625,600,000 $22,327,700,000 $23,018,700,000 $23,732,279,700

Multiplier 1.6 1.6 1.6 1.6 1.6
100% Limit $32,522,080,000 $34,600,960,000 $35,724,320,000 $36,829,920,000 $37,971,647,520
Bonds Subject to Limit $25,680,947,212 $26,694,002,212 $27,781,222,212 $28,935,617,212 $30,173,067,212
Debt Incurring Margin $6,841,132,788 $7,906,957,788 $7,943,097,788 $7,894,302,788 $7,798,580,308
Percentage of Limit 78.96% 77.15% 77.77% 78.57% 79.46%
Margin to 90% Limit $3,588,924,788 $4,446,861,788 $4,370,665,788 $4,211,310,788 $4,001,415,556
Assumptions:
• Consensus Revenue as of 11/12/2024 and Office of Policy and Management estimate for FY
2029. Annual average of $2.6 billion of new bond authorizations;
• $1.6 billion of new General Obligation Bonds (FY 25 – FY 29) plus UCONN Bonds are issued
each year.
• FY 2025 – FY 2029 Bonds Subject to Limit does not include principal payments on the prior
year bonds to account for possible changes to issuance schedules.

47
 BONDING CAPS
During the 2017 legislative session, limitations on bond allocations, allotments and issuances were
enacted. Public Act 23-1 extended and modified the caps. These limitations are described below.

• Allocation Cap: This cap imposes a limit on State Bond Commission general obligation bond allocations
for each fiscal year. Public Act 23-1 set the cap to $2.400 billion in fiscal year 2024. The cap amount is
indexed to inflation. The inflation-adjusted cap is $2.515 billion for fiscal year 2025, $2.601 billion for
fiscal year 2026, $2.668 billion for fiscal year 2027, $2.730 billion for fiscal year 2028, and $2.792
billion for fiscal year 2029.

• Allotment Cap: This cap limits allotments issued by the Governor's Office each fiscal year. The cap
amount is indexed to inflation. General obligation bonds issued as part of CSCU 2020 or UConn 2000
are exempted from the cap. Public Act 23-1 set the cap to $2.400 billion in fiscal year 2024. The
inflation-adjusted cap is $2.515 billion for fiscal year 2025, $2.601 billion for fiscal year 2026, $2.668
billion for fiscal year 2027, $2.730 billion for fiscal year 2028, and $2.792 billion for fiscal year 2029.

• Issuance Cap: This cap limits bond issuances by the Treasurer's Office each fiscal year. The cap amount
is indexed to inflation. General obligation bonds issued as part of CSCU 2020 or UConn 2000 are
exempted from this cap. Public Act 23-1 set the cap to $2.400 billion in fiscal year 2024. The inflation-
adjusted cap is $2.515 billion for fiscal year 2025, $2.601 billion for fiscal year 2026, $2.668 billion for
fiscal year 2027, $2.730 billion for fiscal year 2028, and $2.792 billion for fiscal year 2029.

48
 BUDGET RESERVE FUND AND POTENTIAL USES OF SURPLUS
After the accounts for the General Fund have been closed at the end of each fiscal year, Connecticut
statute directs the Comptroller to deposit any unappropriated General Fund surplus in the Budget Reserve
Fund (BRF, a.k.a. “rainy day fund”) until the fund reaches its statutory threshold. That threshold was 15
percent of net General Fund appropriations through FY 2023. Section 15 of Public Act 23-1 increased that
threshold from 15 percent to 18 percent of net General Fund appropriations beginning in FY 2024 (see
‘Recent Reforms’ in the next section of this report for further explanation). The graph below depicts
historical operating deposits to and withdrawals from the Budget Reserve Fund. As a result of the deposits
from the volatility cap and the unappropriated surplus at the end of FY 2020, the BRF reached and
exceeded its statutory cap of 15 percent at the start of FY 2021. Prior to the increase in the BRF threshold
for FY 2024, the BRF has remained at its maximum capacity through FY 2023. In just one year, unaudited
financial results indicate that the BRF attained its new maximum 18 percent threshold at the conclusion
of FY 2024.

Recent Reforms
Several recent statutory changes impact the Budget Reserve Fund. Public Act 17-2 of the June Special
Session implemented, and Public Act 18-81 later amended, a revenue volatility cap which directs
collections from any volatile revenue sources above a certain threshold to the Budget Reserve Fund. (See
page 30 for more about the revenue volatility cap.) The volatility cap resulted in transfers shown in the
table below, providing substantial — and much-needed — improvement in the state’s reserves and
facilitating significant deposits to the state’s major pension funds.
49
 Rebuilding Budgetary Reserves and Reducing Pension Liabilities
Since the Enactment of the Volatility and Revenue Caps
As of November 20, 2024
(in millions)

ACTUAL
Sources of Funds Uses of Funds
Fiscal Surplus/ Volatility
Year (Deficit) Cap Total SERS TRSBRF Total
1. 2018 $ (482.9) $ 1,471.3 $ 988.4 $ - $ - $ 988.4 $ 988.4
2. 2019 370.6 949.7 1,320.3 - - 1,320.3 1,320.3
3. 2020 38.7 530.3 569.0 61.6 - 507.4 569.0
4. 2021 475.9 1,241.5 1,717.4 714.7 903.6 99.1 1,717.4
5. 2022 1,261.4 3,047.5 4,308.9 3,204.0 903.6 201.3 4,308.9
6. 2023 555.3 1,321.8 1,877.1 1,046.5 828.1 2.5 1,877.1
7. 2024 400.9 1,321.3 1,722.3 513.9 419.1 789.2 1,722.3
8. Subtotal $ 2,619.9 $ 9,883.4 $ 12,503.4 $ 5,540.7 $ 3,054.4 $ 3,908.2 $ 12,503.4

9. Total SERS & TRS $ 8,595.2

10. % of Total 21.0% 79.0% 100.0% 44.3% 24.4% 31.3% 100.0%

PROJECTION
Sources of Funds Uses of Funds
Fiscal Surplus/ Volatility
Year (Deficit) Cap Total SERS TRS BRF Total
11. 2025 (Est.) $ 190.3 $ 1,403.5 $ 1,593.8 TBD TBD TBD $ 1,593.8
12. Subtotal $ 190.3 $ 1,403.5 $ 1,593.8 TBD TBD TBD $ 1,593.8

13. Grand Total $ 2,810.2 $ 11,286.9 $ 14,097.2 $ 5,540.7 $ 3,054.4 $ 3,908.2 $ 14,097.2

14. % of Total 11.9% 88.1% 100.0%

Notes:
(1) Volatility Cap is income tax estimates & finals and pass-through entity tax above a set threshold.
(2) SERS = State Employees Retirement System
(3) TRS = Teachers' Retirement System
(4) BRF = Budget Reserve Fund
(5) Current projections for FY 2025 estimate $1,593.8 million will be available for allocation to SERS,
TRS, and the BRF in amounts to be determined based on updated pension valuations and the
Treasurer's determination of the State's best interests.

50
Public Act 17-2 of the June Special Session, as amended by section 16 of Public Act 23-1, also introduced
a revenue cap that limits the amount of General Fund appropriations to a percentage of General Fund
revenue. The limit began at 99.5 percent in fiscal year 2020 and phases down to 98.75 percent for FY 2023
and thereafter. (See page 30 for more about the revenue cap) The resulting unappropriated operating
margin will help add to the rainy day fund in good years and provide a buffer against drastic expenditure
reductions or revenue increases when there is a sudden mid-year downturn in the economy.

Section 15 of Public Act 23-1 made several revisions to the Budget Reserve Fund. As previously discussed,
it increased the Budget Reserve Fund threshold from 15 percent to 18 percent of net General Fund
appropriations, allowing for greater stability in case of a recession or economic downturn. Public Act 23-
1 also modified the funding mechanisms for the Budget Reserve Fund. If the Budget Reserve Fund is
below the 15 percent threshold, the volatility cap transfer and the surplus are both fully deposited into
the Budget Reserve Fund until it reaches that 15 percent threshold. Once the Budget Reserve Fund
reaches the 15 percent threshold, 50 percent of any remining volatility cap transfer or unappropriated
surplus amount goes to the Budget Reserve Fund, and the other 50 percent is transferred to reduce the
unfunded liabilities of the State Employees’ Retirement System (SERS) or the Teachers’ Retirement System
(TRS). Once the Budget Reserve Fund reaches its maximum 18 percent threshold, any remaining volatility
cap transfer or unappropriated surplus amounts get transferred to reduce the unfunded liabilities of SERS
and/or TRS.

Use of Budget Reserve Fund

Statutorily, the Budget Reserve Fund may only be expended:
• To fund a deficit in the immediately preceding fiscal year;
• By transfer of the General Assembly if any consensus revenue forecast projects a decline in
General Fund revenues in the current biennium of one percent or more;
• By transfer of the General Assembly if the April 30th consensus revenue forecast projects a decline
in General Fund revenues in the ensuing biennium of one percent or more from the current year;
or
• By transfer of the General Assembly if the BRF equals 5 percent or more of current year
appropriations of the amount in excess of the 5 percent for the payment of unfunded past service
liability of the SERS and TRS pension systems which are in addition to any regular contributions.

Discussion of Possible Uses of Surplus Funds

Under current law (CGS Sec. 4-30a), unappropriated surpluses are committed to the Budget Reserve Fund
until the maximum 18 percent authorized by law. Other possible uses of surplus funds could include:
• Reducing the unfunded liability of the State Employees Retirement Fund;
• Reducing the unfunded liability of the Teachers’ Retirement Fund;
• Reducing bonded indebtedness;
• Reducing the unfunded liability for other post-employment benefits (OPEB); or
• Providing funds for higher education matching grants as per sections 10a-8c, 10a-77a, 10a-99a,
10a-109c, 10a-109i, and 10a-143a of the Connecticut General Statutes.

51
Budget Reserve Fund Maximum Threshold
At the end of FY 2020, the balance of the Budget Reserve Fund was estimated at 15.3 percent, $61.6
million more than the statutory threshold of 15 percent of the following fiscal year’s net General Fund
appropriations. By statute, the State Treasurer determines whether to transfer any sums that exceed the
statutory 15 percent cap to reduce unfunded liabilities in the State Employees Retirement Fund or the
Teachers’ Retirement Fund. The $61.6 million in excess of the 15 percent threshold was transferred to
reduce the unfunded liabilities of the State Employees Retirement Fund. Again, at the conclusion of FY
2021, the balance of the Budget Reserve Fund was estimated at 22.8 percent, about $1,618.3 million more
than the statutory threshold of 15 percent of the following fiscal year’s net General Fund appropriations.
Of the estimated $1,618.3 million in excess of the 15 percent threshold, $903.6 million was transferred to
reduce the unfunded liabilities of the Teachers’ Retirement Fund and the balance of $714.7 million was
transferred to reduce the unfunded liabilities of the State Employees Retirement Fund. FY 2022 concluded
with the Budget Reserve Fund at 33.6 percent of the following fiscal year’s net General Fund
appropriations, about $4,107.6 million over the 15 percent statutory limit. Of the $4,107.6 million,
approximately $903.6 million was transferred to reduce the unfunded liabilities of the Teachers’
Retirement Fund and the estimated balance of $3,204.0 million was transferred to reduce the unfunded
liabilities of the State Employees Retirement Fund. FY 2023 concluded with the Budget Reserve Fund at
23.5 percent of the following fiscal year’s net General Fund appropriations, about $1,874.6 million over
the 15 percent statutory limit. Of the $1,874.6 million, $828.1 million was transferred to reduce the
unfunded liabilities of the Teachers’ Retirement Fund and the balance of $1,046.5 million was transferred
to reduce the unfunded liabilities of the State Employees Retirement Fund.

At the conclusion of FY 2024, the volatility cap transfer and unappropriated surplus totaled $1,722.3
million. Of the $1,722.3 million, approximately $105.0 million was transferred to the Budget Reserve Fund
to bring the total to 15 percent of the following fiscal year’s net General Fund appropriations. The balance
of $1,617.3 million was available to be split evenly – $808.6 million each – between SERS/TRS and the
Budget Reserve Fund until the Budget Reserve Fund reached 18%. Approximately $684.2 million was
needed to bring the Budget Reserve Fund total to 18% (total transfer of $789.2 million) leaving the other
half ($808.6 million) and remaining portion of the Budget Reserve Fund’s share ($124.5 million) to be
transferred to the State Employees Retirement Fund and the Teachers’ Retirement Fund (total transfer of
$933.1 million). Of the $933.1 million, approximately $513.9 million was transferred to reduce the
unfunded liabilities of the State Employees Retirement Fund and $419.1 million was transferred to reduce
the unfunded liabilities of the Teachers’ Retirement Fund. It should be noted that the FY 2024 ending
balance and the estimated $1,722.3 million excess balance are unaudited figures and may be revised as
the State Comptroller completes the state’s Annual Comprehensive Financial Report for FY 2024.

Pension Savings
The two graphs below reflect deposits to the pension funds in addition to the ADEC along with the
estimated annual savings from the additional deposits. These additional deposits to the state’s pension
funds have a tremendous positive impact on the state’s operating budget by saving hundreds of millions
of dollars in pension contributions annually for the next 25 years. With the additional deposits through
the fiscal year ending June 30, 2024, OPM estimates the state will save $730.6 million annually.

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 PROJECTED TAX CREDITS
Tax credit projections are based on data from the Department of Revenue Services. Personal Income Tax
credits are projected using income years 2020-2022 data. Corporation business tax credits are projected
using FY 2022-2024 data. Appropriate growth rates are applied to base year data to derive an estimate
for future fiscal years.
Projected Total Amounts of Tax Credits Claimed
(In Thousands)

FY 2024 FY 2025 FY 2026 FY 2027 FY 2028

Personal Income Tax Credits Est.(1) Proj. Proj. Proj. Proj.
Pass-through Entity Tax Credit $ 1,137,700 $ 1,195,400 $ 1,239,400 $ 1,286,300 $ 1,335,000
Earned Income Tax Credit 186,800 196,200 199,900 205,000 210,300
Property Tax 146,900 149,800 152,800 155,900 159,000
Connecticut Higher Education Trust (CHET) 17,800 18,600 19,500 20,400 21,300
Angel Investor 7,500 5,000 5,000 5,000 5,000
All Other(2) 1,550 3,050 3,050 3,050 3,050
Total Personal Income Tax $ 1,498,250 $ 1,568,050 $ 1,619,650 $ 1,675,650 $ 1,733,650

Business Tax Credits

Film Industry Production(3,5) $ 118,000 $ 105,000 $ 104,500 $ 109,000 $ 113,500
Fixed Capital 43,500 41,000 44,000 44,000 44,000
JobsCT - 1,000 5,000 5,000 5,500
Research and Development Expenditures 40,500 59,000 59,000 59,500 60,000
Research and Experimental Expenditures 33,500 29,500 30,500 31,000 32,000
(3)
Urban and Industrial Reinvestment 9,000 20,500 21,000 21,500 22,000
Electronic Data Processing(3) 21,500 21,500 22,000 23,000 23,500
(3)
Historic Rehabilitation 14,500 18,000 18,000 18,000 18,500
Housing Program Contribution(3) 10,000 10,000 10,000 10,000 10,000
Human Capital 4,000 7,300 7,300 7,400 7,400
(3)
Film Industry Infrastructure 3,000 2,000 2,000 2,000 2,000
Machinery and Equipment 600 700 700 700 700
(3,4)
All Other Credits 38,250 67,500 93,250 94,250 94,500

Total Business Tax Credits $ 336,350 $ 383,000 $ 417,250 $ 425,350 $ 433,600

Total Projected Amount Claimed $ 1,834,600 $ 1,951,050 $ 2,036,900 $ 2,101,000 $ 2,167,250

(1) FY 2024 Pers ona l Income Ta x credi ts a re ba s ed on movi ng a vera ges ; FY 2024 bus i nes s ta x credi ts a re rounded a ctua l s wi th
ens ui ng fi s ca l yea rs ba s ed on movi ng a vera ges pl us pol i cy cha nges .
(2) Incl udes Sti l l born Ta x Credi t, Hi s tori c Homes Reha b. Ta x Credi t, & Youth Devel opment Orga ni za ti on Contri buti on Ta x Credi t.
(3) Incl udes credi ts cl a i med under the Corpora ti on Ta x, Ins ura nce Premi ums Ta x, a nd the Publ i c Servi ce Compa ni es Ta x of whi ch
a l l projecti ons a re ba s ed off of FY 2022, 2023, a nd 2024 da ta .
(4) Incl udes Aeros pa ce Rei nves tment Act wi th Sa l es Ta x a ba tements per PA 16-1 of the September Speci a l Ses s i on i n FY 2021 a nd
(5) Incl udes a mounts a ppl i ed a ga i ns t Sa l es Ta x l i a bi l i ty.

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