FISCAL ACCOUNTABILITY OF STATE GOVERNMENT

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FISCAL ACCOUNTABILITYOF STATE GOVERNMENT
Presentation Prepared for the Appropriations
Committee and the Finance, Revenue, and Bonding
Committeeby the Office of Policy and Management
December 4, 2007
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INTRODUCTION
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FINANCIAL SUMMARY OF FUNDS
Note 2008-09 Revised Enacted shows rollout of
2007-08 recognized deficiencies
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FINANCIAL SUMMARY OF FUNDS
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PROJECTED BALANCE OF THE GENERAL FUND
Note Fiscal years 2010-2012 assume
appropriations prior to reductions required by
the Constitutional expenditure cap.
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MAJOR COST DRIVERSLONG TERM
OBLIGATIONSREVENUE EXPENDITURE TRENDS
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WATCH LISTAGENCY SUBMITTED TECHNICAL ADJUSTMENTS
TO ENACTED FY09 BUDGET
General Fund
Special Transportation Fund
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STRUCTURAL HOLES
CREATED BY FUNDING ONGOING EXPENDITURES WITH
PRIOR YEAR SURPLUSES IMPACT ON FISCAL 2010 -
GENERAL FUND (In Millions)
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LONG-TERM OBLIGATIONS

• The states long-term obligations total 54.2
  billion.
• This equates to approximately 15,500 for every
  man, woman and child in Connecticut.
• In comparison, total Personal Income Tax
  collections in FY08 will only be 7.345 billion.

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LONG-TERM OBLIGATIONS DWARF THE BUDGET RESERVE
FUND
(In Millions)
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DEBT BURDEN COMPARISON
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IMPACT OF DEBT EXPENSES
GENERAL AND TRANSPORTATION FUND DEBT SERVICE
EXPENDITURES
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CONNECTICUTS BOND RATINGCURRENT GENERAL
OBLIGATION BOND RATING
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MOODYS INVESTORS SERVICE U.S. CREDIT SCORECARD
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DEBT AS A PERCENTAGE OF PERSONAL INCOME
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TAX-SUPPORTED DEBT PER CAPITA
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UNFUNDED PENSIONS TEACHERS RETIREMENT SYSTEM
CONTRIBUTIONS
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UNFUNDED PENSIONS CONNECTICUT TEACHERS
RETIREMENT SYSTEM
AS OF 6/30
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STATE EMPLOYEES RETIREMENT SYSTEM CONTRIBUTIONS
CONTRIBUTIONS TO THE STATE EMPLOYEES RETIREMENT
SYSTEM
(In Millions)
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UNFUNDED PENSIONS
STATE EMPLOYEES RETIREMENT SYSTEM AS OF 6/30
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2006 STATE RETIREMENT SYSTEM STATISTICS STATE
EMPLOYEE AND TEACHERS SYSTEM COMBINED
Source National Association of State Retirement
Administrators Public Fund Survey for FY 2006
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STATE EMPLOYEES PENSION HEALTH INSURANCE ALL
FUNDS
SERS HEALTH INSURANCE EXPENDITURES As Of 6/30
?
?
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GROWTH IN SIGNIFICANT STATE EXPENDITURES
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OTHER POST EMPLOYMENT BENEFITS
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DEPARTMENTAL EXPENDITURES
(In Millions)
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DEPARTMENT OF SOCIAL SERVICES MEDICAID
MEDICAID EXPENDITURES (In Millions)
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DEPARTMENT OF EDUCATION
EDUCATION COST SHARING GRANT (In Millions)
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EDUCATION GRANTS
SCHOOL READINESS GRANT TO PRIORITY SCHOOL
DISTRICTS (In Millions)
GRANTS FOR MAGNET SCHOOLS AND SPECIAL
EDUCATION (In Millions)
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EARLY CHILDHOOD PROGRAM
DEPARTMENT OF EDUCATION COMPETITIVE GRANT (In
Millions)
DEPARTMENT OF SOCIAL SERVICES CHILD DAY CARE
PROGRAM (In Millions)
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SUMMARY OF LOCAL AID
ESTIMATED FORMULA GRANTS TO MUNICIPALITIES (In
Millions)
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COST DRIVERS FUTURE CONSIDERATIONS

• Health Care Access Expansions
• DOC/Parole Changes
• Age of Jurisdiction for 16 and 17 Year Olds
• (annualized in excess of 100M/year not
  including capital expenditures)

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PERSONAL INCOME TAX
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SALES AND USE TAX
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THE BUDGET RESERVE FUNDUSE OF SURPLUS
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STATES WITH BUDGET RESERVE FUNDS
General Reserve FundsFiscal Year Ending June,
2007
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BUDGET RESERVE FUND BALANCE
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CONSEQUENCES OF AN INSUFFICIENT BUDGET RESERVE
FUND

• Since the 594.7 million Budget Reserve Fund
  Balance in FY2001 was insufficient the state had
  to undertake numerous draconian measures to
  balance the budget such as
• Deficit financing of 319 million
• Implementation of an Early Retirement Program
• Lay-offs of over 2,500 employees
• Increase the Personal Income Tax rate by 11 from
  4.5 to 5.0
• Increase the Cigarette Tax by 200 from 0.50 to
  1.51 per pack
• Lower the clothing exemption on the sales tax
  from 75 to 50 per item
• Securitized the Energy Conservation and Load
  Management and Clean Energy Funds to raise a
  one-time 194 million
• Closed intake to the Child Care Program
• Limited the continued coverage under Temporary
  Family Assistance
• Reduced reimbursement levels to medical providers

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BUDGET RESERVE FUND SHORTFALL
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USE OF GENERAL FUND SURPLUSES
FY1992 to FY2003
FY2004 to FY2007
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ECONOMIC AND DEMOGRAPHIC TRENDS
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SIGNIFICANT DEMOGRAPHIC TRENDS
Projections of The Population in
Connecticut (Mid-Year Resident Population In
Thousands)
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DEMOGRAPHIC TRENDS
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HOUSING, MORTGAGES AND CREDIT QUALITY
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ECONOMIC INDICATORS
ASSUMPTIONS USED TO DEVELOP REVENUE ESTIMATES
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FIVE YEAR BOND PROJECTIONS
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PROJECTED GENERAL OBLIGATION BOND ALLOCATIONS
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DISTRIBUTION OF GO BOND FUND ALLOCATIONS
ACTUAL FY2003 - FY2007
PROJECTED FY2008 - FY2012
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SUMMARY
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SUMMARY

• The state is projected to experience a surplus at
  the end of FY2007-08 and 2008-09, if expenditures
  are controlled consistent with the spending cap.
• The state is projected to experience deficits at
  the end of FY2009-10, 2010-11 and 2011-12 based
  on current services projections.
• Projections indicate that spending will exceed
  available room under the expenditure cap in
  fiscal years 2009-10 and 2010-11.
• Projections also indicate that while spending
  will not exceed available expenditure cap room in
  fiscal year 2011-12, it will exceed available
  revenue.
• The budget reserve fund fails to reach the
  statutorily required 10 over the 2007-08 through
  2011-12 projection period, putting the state at
  risk in the event of a recession.
• Without further action, expenditures are expected
  to outpace the growth in revenues.
• Debt service will continue to grow and consume a
  significant portion of the budget despite efforts
  to maintain general obligation allocations and
  issuances at the current level.
• The state faces significant long-term obligations
  including debt, unfunded pension liabilities and
  unfunded post-employment retirement benefits
  which are estimated to exceed 54 billion in
  total.