The issue was one of candidate Dan Malloy’s most important campaign promises and on January 3, 2011 it was the topic of my very first post here on Wait, What?; MIND THE GAAP – Confronting the Cost of Fiscal Honesty.
Candidate Malloy had made it abundantly clear, he was going to put Connecticut fiscal house in order and that meant moving the state to Generally Accepted Accounting Principles, the modern accounting system.
My first post (link above) provides some background on the whole GAAP issue, but my assessment begins with the observation that with Malloy’s commitment, “we will get a firsthand look at the underlying cost of introducing Fiscal Honesty to the state’s budget. Why…because one of Governor-elect Dan Malloy and Lt. Governor-Elect Nancy Wyman’s most significant campaign promises was to move Connecticut government to Generally Accepted Accounting Principles (GAAP). Connecticut requires all cities, towns and boards of education to adhere to GAAP standards; it just exempts itself from these common sense requirements.”
My post went on to say “during this year’s gubernatorial campaign Dan Malloy and Nancy Wyman repeatedly pledged that moving Connecticut to GAAP accounting was the single most important way to ensure greater honesty and transparency in state budgeting…and then I concluded with “The task is a noble, important and worthy one. Connecticut state government should be required to conduct itself using this basic accounting system. There is only one problem; shifting the State to GAAP will cost $1.2 billion dollars. That’s $1.2 billion on-top of the $3.7 billion dollar budget short fall Connecticut is facing for next year.”
So, the day Governor Malloy was sworn into office, he signed an Executive Orders requiring the state start utilizing GAAP principles.
A month later, after they realized a rapid shift to GAAP was prohibitively expensive, Malloy proposed a state budget that made a $75 million down payment this year and another $50 million down payment next year, followed by a 15 year $150 million dollar a year payment schedule that would complete the transition to GAAP and allow Connecticut to properly manage its state budget and finance system. While the implementation was now scheduled to take place over 17 years and not immediately as he had promised, it was still a step forward.
All this year, even when Malloy’s budget office was begrudgingly forced to admit there might be a budget deficit, Governor Malloy, OPM Chief, Ben Barnes and anyone else with the authority to speak for the Governor stuck to their talking points, pledging that the State would find the funds to make that critical first payment toward its 17-year GAAP conversion process.
And then, quietly, in the middle of the chaos that is known as the last few days of the legislative session, the Malloy administration did it…they withdrew their commitment to make the $75 million payment this year and chose to forego the opportunity to take that first baby step toward fiscal accountability.
Speaking on behalf of Governor Malloy, Gian-Carl Casa, of the Office of Policy and Management, admitted to CTMirror’s Keith Phaneuf that “we do remain committed to GAAP…We are hopeful we will have a surplus at the end of FY 13 and can apply that to GAAP.”
The Malloy Administration is “hopeful” that you will have a surplus next year and can then begin the conversation toward GAAP?
As a direct result of this administration’s bad fiscal policy decisions and the faltering economy, Connecticut’s next budget is already a half a billion dollars in deficit and they’re telling the public that they are “hopeful” that there will be a surplus so they can begin the GAAP conversion process that they had promised.
Oh, and when a reporter recently asked Malloy whether his new budget changes (including forgoing the GAAP payment) preserved his campaign pledges, Malloy was heard to say “Yeah, I think it does…Yeah, I absolutely think it does.”
But perhaps the biggest kick of all is that as part of the budget changes that the Malloy Administration and Legislature made this week, they voted to remove the language that said if there was a surplus this year it would go toward the GAAP payment. Instead, the law now reads that if, by some miracle there is a budget surplus, the money will automatically be shifted into next year’s budget.