Lamont can’t dance despite a $5 billion surplus and stellar jobs picture

How’s it going in Connecticut? On one level, the 2022 chart looks solid.

New figures show a staggering budget surplus of $5.5 billion for the fiscal year that ended June 30. We have seen six months of better overall economic activity than the country. The year was marked by a sharp drop in the unemployment rate.

“I wouldn’t trade our economy for anyone’s,” Governor Ned Lamont told me in conversation Thursday as we toured S&S Worldwide, a century-old company in Colchester with 270 employees that the State has saved it from almost certain extinction. last winter.

“I like the way we are positioned now,” added Lamont. “I think we have a diverse economy, I think we have one of the best workforces in the world. We have work to do there, but I think the economy is growing. I think our population will continue to bring in young people. »

In any other year since the Reagan era, the numbers would have a governor seeking re-election dancing in a parade on the back of a flatbed truck

But Governor Ned Lamont can’t celebrate. Not in a year with US inflation above 9% (by a key metric), not in a year when GOP leaders led by his November opponent Bob Stefanowski coax deeper tax cuts to help families struggling with higher costs.

Not in a year when many experts are predicting a recession by 2023 or sooner as the Federal Reserve tightens the money spigot in hopes of slowing rising prices.

So, instead of stepping forward in the summer of his re-election campaign, Lamont is treading on economic eggshells. During our half-hour chat about the state of the state’s prosperity, the governor bragged about where Connecticut is and how we’re prepared to weather a downturn — though he acknowledged, as Stefanowski keeps saying it, that many families struggle with prices.

“People have more faith in the state, people are moving into the state, people are growing into the state,” Lamont said, sitting in a conference room at the sprawling compound of S&S, a supplies distributor and of hobby items for schools, summer camps and long-term care facilities that changed his fortunes.

“It hasn’t necessarily resonated with table issues yet, but I think it will. In the meantime, I understand people are going through inflationary hell,” the governor added. to say that our finances are in order, that businesses are coming back… Above all, you have to take care of people at their kitchen table.”

He says he’s doing just that, with $640 million in tax breaks and one-time rebates to parents, residents who own homes and cars, low-income workers and retirees — and using 4.1 billions of dollars from the state surplus to reimburse underfunded employee pensions.

This additional payment totaling $5.7 billion last year and this year will save taxpayers about $484 million annually over the next 25 years.

Stefanowski says Lamont is far from what he needs to do. He is asking for more tax breaks in place of some of the extra pension payments as he peppers the state with ads about families and small businesses unhappy with the current situation. And Stefanowski disagrees with Lamont’s view that the state’s economy is well positioned.

“Governor Lamont speaks out of both sides of his mouth. Last week he said he needed the rainy day fund for an impending recession,” Stefanowski said in an emailed statement. “This week, he is optimistic about our economy?”

Numbers vs Fears

While fear of recession and anger over inflation — misdirected at Democrats — could favor Stefanowski and Republicans, the numbers show Connecticut is in pretty good shape. “I think we’re in the strongest financial position since I’ve paid attention to it, in the last generation or so,” Lamont said, careful to separate that from the situation of the families.

The state’s unemployment rate fell from 5.3% in January to 4% in June, as Connecticut closed the gap to the national rate of 3.6%.

Connecticut saw job gains of 2.4% over the past year (based on preliminary reports that could rise or fall significantly with revisions). That’s slower than the nation’s 4.3%, but it’s still a healthy clip.

More importantly, the percentage of working adults rose in Connecticut while it stagnated nationally, meaning many of those missing 100,000 workers reappeared on the scene. In fact, the total number of Connecticut residents who reported working in June rose 3.7% last year, compared to just 1.4% nationally.

Does this mean we win the work from home draw? Too early to tell, but a snapshot of the home sales market appears to show Connecticut cooling more slowly than most other states.

A separate report last week showed Connecticut was one of three states along with Massachusetts and Pennsylvania that saw an increase in their number of job openings in May, reaching 120,000. That’s good for workers and this could be a sign of a less painful downturn.

Recession fears are real. Lamont is talking about it openly, with interest rates rising, corporate profits falling and New York experiencing a slowdown in financial market tax revenues. “We are ready,” he told me. “We don’t have to raise anyone’s taxes, we don’t have to panic, we don’t have to cut child care costs – all the things we’ve been through all seven years like clockwork in this state for the past 40 years.”

Friendly with truckers, really?

The state does not lack question marks, as always. We don’t know the quality of Connecticut’s new jobs, as hard data on pandemic-era earnings remains elusive.

Lamont spoke of the strong defense industry, a financial sector holding its own with a nascent fintech cluster, and some triumphs in life sciences. On the other hand, the biggest gains reported over the past year have been in leisure and hospitality, with many low-paying jobs.

Lamont says he has made the state more business-friendly with economic development incentives and other measures, including pension payouts. It is a hotly debated topic. We’re more worker-friendly, absolutely, with paid family and medical leave and a minimum wage headed toward $15 next year.

I spoke with a 15-year veteran logistics analyst at S&S, Patricio Hurtado, who told me he saw an economic recovery.

“Connecticut is becoming more business-friendly,” he said, “for trucking companies.”

Say what? Lamont’s animosity toward truckers — in the form of a $90 million-a-year tax on heavy trucks and a very small diesel tax increase that automatically took effect July 1 — is the cornerstone of Stefanowski’s campaign, with ad after ad about how these taxes are killing the state by driving higher costs.

You can’t write that stuff. No one asked me to speak with Hurtado. His comment illustrates that when it comes to politics and economics, you can’t predict baseball.

$5 billion football

This massive budget surplus is the source of the loudest volleys in this election and it keeps growing.

A report from the governor’s budget office on Wednesday showed a likely surplus of $1.3 million when the state closes the fiscal year books later this summer. This is on top of a $3 billion surplus in quarterly taxes paid largely by the wealthy from dividends and capital gains.

And on top of that, the state diverted $1.2 billion of money from the fiscal year that just ended to the one that started on July 1. The windfall included $560 million in federal stimulus money that we didn’t need, and $350 million in surplus. money to pay for state employee raises and child tax credits paid to parents in a few weeks.

The grand total: $5.5 billion surplus for the state’s $21 billion budget, or 26%.

After years of criticizing Democrats for mismanaging the state in deficits, Stefanowski and the GOP leaders in the Legislature can no longer play that card. Instead, they say Lamont should give more of that windfall back to taxpayers in the form of lasting tax cuts.

For that to happen, it would take a special session of the legislature, which no sane governor would allow in an election year, because liberals and conservatives would come up with all kinds of crazy ideas to make political hay.

I asked Lamont, if he could magically give back more to taxpayers without a special session, now that the surplus is $600 million higher than it was two months ago, would he ?

No, he said.

“I like where we are. … I think people are seeing the money coming into their pockets right now. Gas prices… are starting to come down.

We can always cut taxes further, and we could do that after the election, Lamont said. The worst would be to cut taxes and have to raise them again when incomes fall. “I don’t want to leave a cliff and I see the clouds of recession over there.”

Those clouds, brought on by the need to repress rising prices, are the reason Lamont won’t be celebrating.

“You have two separate stories,” the governor said. “The fact that we are balancing the budget and running a surplus has nothing to do with the middle class being squeezed by high inflation…When you pay more at the grocery store, at the pump, it hit you hard.”

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