HARTFORD (AP) — State Comptroller Kevin Lembo says Connecticut is on track to wrap up the fiscal year that ended June 30 with a surplus of almost $701 million surplus.

The Democrat says that amount will be reduced by nearly $541 million to cover the cost of a new special reserve fund for the Teacher's Retirement System and an anticipated legal settlement with the state's hospitals over a taxing dispute.

Lembo says various state revenue generators have exceeded projections. For example, the state expects to take in nearly $40 million than originally projected from the state's sales tax and more than $25 million than anticipated from the corporation tax.

Lembo says these "over-performing categories are positive signs," but warns that Connecticut should maintain financial discipline and prepare for a possible economic downturn.

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