WARNING!  WARNING! The state of Connecticut’s Fiscal Health

WARNING!  WARNING! The state of Connecticut’s Fiscal Health

Last Friday, the Connecticut General Assembly’s Office of Fiscal Analysis issued its annual Fiscal Accountability Report.  The report serves as the definitive independent assessment of the fiscal health of the state of Connecticut.

Unlike the “projections” produced by the Office of Policy and Management, which are designed to protect a sitting governor from criticism, the work done by the Office of Fiscal Analysis is widely respected and noted for its accuracy.

Those truly interested in understanding the Connecticut state budget and the issues surrounding taxes and spending in Connecticut should begin by reading OFA’s Fiscal annual Accountability Report.  The OFA report not only provides a review of the status of this year’s state budget but they also provide a detailed assessment of what will occur over the next three fiscal years.

Unlike the rosy picture painted by Dannel Malloy during the recent gubernatorial campaign, OFA’s report is stark and disturbing.

The Office of Fiscal Analysis reports;

  • This year’s state budget (FY15) is running at least an $89.1 million deficit. (Although Malloy repeatedly claimed, up until Election Day, that there will be NO state deficit, his budget director has finally admitted that this year’s state budget deficit is closing in on $100 million.)
  • The projected state deficit for FY16 (next year) is $1.3 billion.
  • The projected state deficit for FY17 is $1.4 billion.
  • And the projected state deficit for FY18 is $1.7 billion.

The single most important factor to understand when reviewing the OFA projections is that they take into account the expected growth in the economy.

For example, this year the state of Connecticut was expecting an additional $350 million in revenue due to growth in the economy.   However, one of the reasons the state is now facing a deficit is that Connecticut’s economy is not growing as quickly as the experts expected.

According to OFA, the factors driving this year’s growing state deficit is that state revenues are $59.1 million lower than originally budgeted and state spending is $30.4 million higher than originally budgeted.

The increased spending is due, in part, to the Malloy administration’s failure to allocate sufficient funds to pay the healthcare costs for state employees retiring from the Department of Corrections and Malloy’s decision to intentionally underfund Connecticut’s magnet schools.

The harsh reality is that Connecticut is short about $4.5 billion in revenue from what it will need to maintain “current services” over the next three and a half years and that this number already takes into consideration an on-going improvement in the economy.

While OFA’s Fiscal Accountability Report is immediately relevant because of its projections about revenue and spending over the next three fiscal years, the report also covers Connecticut’s long-term “obligations” or “liabilities,” otherwise known as the money that taxpayers will need to come up with in order to make the state’s debt payments and fund the state’s other obligations, such as pensions.

It is in this area that the news is even more troubling.

The following chart highlights Connecticut’s Unfunded Liabilities.

Liability Amount in Billions
Debt Outstanding $21.3 Billion
State Employee Retirement System (SERS) $12.3
Teachers’ Retirement System $10.8
State Post Employment Health and Life $19.5
Teachers’ Post Employment Health $2.4
Generally Accepted Accounting Principles Deficit $1.1
TOTAL $68.4 Billion

 

The total amount in long-term obligations means that Connecticut taxpayers will need to come up with $68.4 billion over the twenty to thirty years, in addition to their federal, state and local tax payments for existing governmental expenses.

In essence, the state’s long-term debt saddles taxpayers with an annual payment in addition to any payments they have for a home mortgage, student loan debts or consumer debts.

With about 1.2 million taxpayer households in Connecticut, the state’s extraordinary level of debt and long-term obligations means that each taxpayer family or household, on average, will be responsible for paying in about $57,000 in addition to their regular tax payments over the next twenty years or so.

And unlike debt at the Federal level which can be easily pushed off, Connecticut MUST pay these obligations during the next two decades or so.  This means that the burden to make these payments will fall on the state’s existing taxpayers and those that are already born but have yet to become taxpayers.

You can read more about the latest budget news at CT Mirror -Budget chief: Some tax cuts may have to wait; CT colleges likely to face cuts and NewsJunkie Gov’s Budget Office, Nonpartisan Analysts Project Deficit.

The reports include confirmation that Governor Malloy will be announcing budget cuts soon and that those cuts will probably be disproportionately aimed at Connecticut’s public colleges and universities.

The CT Mirror story also reports that the Governor’s operation is already backpedaling on nearly $220 million in tax cuts that Malloy pushed through before the election and another $40 million in tax cuts that he promised to put into law if he were re-elected.

The list of new and proposed tax cuts that Malloy promoted during his campaign are now in  jeopardy include;

  • Restoring the sales tax exemptions on clothing and non-prescription medications.
  • A new income tax credit for retired teachers.
  • Returning the Earned Income Tax Credit for working poor families to its original level.
  • And putting an end to the corporation tax surcharge.
  • Plus new tax cuts, including a special tax break for urban businesses and an income tax credit for those who are paying interest on their student loans.
  • Sleepless in Bridgeport

    Shame on us! Why did the Republicans run a moron for governor? Who is Danny boy going to replace Stephan Pryor with??? The Marquis de Sade? Paul Vallas (looking for a bank to rob)? Adamwowski? Dr. Sharpe? Dr. Carter? Dr Seuss?

    • Steve Perry

      SIB
      you forgot sum1
      How about Me, Steve “Strap um up There’s gonna be head injuries” Perry for Education commissar

      • Sleepless in Bridgeport

        You certainly da man!

      • sharewhut

        He didn’t forget you Steve, he just presumed you’d be taken care of sufficiently via new charter contracts. Wouldn’t want to make you give yourself millions in contracts, might make him have to rewrite some laws to avoid charges of impropriety.

    • jhs

      Malloy won with lies and distortions in ads aided by the unions to get him elected. Malloy told the unions, “I am your servant” so they taxpayer shouldn’t expect anything but bad news. The takers won.

      • sharewhut

        The union “leadership” and their toadies helped get him elected, the numbers in the middle class suburbs where most of the rank and file vote lives shows it wasn’t pure support. Leadership gave money, helped with urban get out the vote shelter cruises, and put chosen faces in front of the cameras. No way he’d get a majority of NP-4 or NP-8 (Correction Officers, Supervisors), DOT, State Police, other more socially “hard line” units. He’d get the “compassionate” units in social services which exist and grow via increases in entitlement programs.

    • sharewhut

      They didn’t run a moron, they ran a BUSINESSMAN not a POLITICIAN. Foley ran, to the detriment of his campaign, like a businessman would. In an understated way, “we have a problem, I can fix it.”, without committing to specifics that might be achievable until he got in and saw what he actually had for resources. A person buying a business is going to say “I’m going to make this company better, change it’s culture, try to retool the operation(etc)”, he’s not going to come in saying “I’m going to give everyone a 20% raise and increase benefits and increase revenues 25% next year…”.
      He ran a businesslike campaign, the closest he got to personal attacks was the “Pinocchio” theme accurately using Dan’s “no tax” promise against him, while Dan (with media help) presented distortions in a fear based campaign. Plenty of people came out contrasting the Bibb and Wood’s presentations in ads, but the most media did was include them in a buried paragraph under an anti-Foley headline. Foley did counter some of these in magazine shows, but he did it without fist-pounding zeal. I’ve posted facts of these businesses before so I won’t repeat, but in short- a breakup scavenger doesn’t own a company for a decade or more, piling money into it, if his objective was dismantling for profit.
      And in spite of his non-politician campaign the end, what won the election for Malloy was the vote of the urban poor fearful that Foley would trim their entitlements. If EVERY state employee or EVERY teacher voted Foley the numbers still would have worked for Malloy. Bottom line, Foley +30k statewide – 57k 3 big cities = Malloy by 27k.

    • sharewhut

      My bet is Vallas- can’t see him hanging around IL after getting spanked in election.

  • msavage

    The moron we don’t know would have been better than the criminal we know, Sleepless. We KNEW Malloy’s MO–had four years to see him in action. How stupid do people have to be to give him another four years to use and abuse us? Do you like the news about the electric rates? Gotta pay UI and CL and P back for contributions made to the Malloy campaign. Contributions that he shouldn’t have had access to–except he trashed the LAW to get his way! There’s no way in hell we’d have been worse off with Foley. Maybe just as bad, but not worse. And probably better, with pushback from the Dem legislators. We are all in deep shit–unless we have the ability/resources to move out of state. And many of us do not.

  • jhs

    Anyone with half a brain would have known Malloy was never going to keep his promises. remember the $55 rebate that a week later became a deficit? The voters elected him and now they are stuck with him. Too bad the rest of us have to suffer this incompetent. But the takers won.

  • JMC

    Hmmm,,, which branch of gov’t. writes the laws in CT? Which branch sets the budget? What party has formed the legislative majority since 1997? Tax, Spend, Entitle, Indebt. What could possibly have gone wrong?

  • sharewhut

    Hey teachers- how’s this for a “Wait…What?” by (some of) your fearless leader…

    http://ctmirror.org/op-ed-plan-for-more-charter-schools-deserves-an-f/

  • Bluecoat

    I feel like I am Steve Martin in Planes, Trains, & Automobiles, standing at the Rental Car Counter? With Dannyboy Malloy standing at the other side of the counter telling me, “You’re F _ _ _ ED”
    http://m.youtube.com/watch?v=S5o8DFfYHS4

  • Bluecoat

    What is the over/under that Hartford still gets money for a new baseball stadium? I say 100%