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Connecticut’s State and Local Government Crisis: Fixing Our Future

Connecticut’s State and Local Government Crisis: Fixing Our Future. Full Accrual=Long-Term Health. Modified Accrual=Short-Term Health. Either of the above are GAAP. Budget Basis can be anything! “Modified Cash” for the State. SHORT-TERM FINANCIAL HEALTH. State of CT–ST Balance Sheet.

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Connecticut’s State and Local Government Crisis: Fixing Our Future

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  1. Connecticut’s State and Local Government Crisis:Fixing Our Future

  2. Full Accrual=Long-Term Health Modified Accrual=Short-Term Health Either of the above are GAAP Budget Basis can be anything! “Modified Cash” for the State

  3. SHORT-TERMFINANCIAL HEALTH

  4. State of CT–ST Balance Sheet

  5. Equity Compared to Others Source: National Association of State Budget Officers The Fiscal Survey of the States – Fall 2011

  6. Long-TermFinancial Health

  7. State of CT – LT Balance Sheet Summarized for discussion purposes from page 29 of 6/30/11 audited statements

  8. Pension & OPEB Obligations • What is this? • Benefits we owe retired employees • Benefits that current employees have earned • OPEB - What is included in the liability? • Being “amortized” onto the books starting in 08 • On these 6/30/11 statements only 4/30th included • That means 24/30th are not included yet! • Most of this debt (80%) is NOT on the books yet!

  9. Percent of Pension Funded CT is #42 of 50 in Funding our Pensions Source: The Pew Center on the States – 2011 report

  10. Source: The Pew Center on the States – 2011 report

  11. OPEB Costs per Year CT is #43 of 50 States in Cost per Year CT is #50 of 50 States in Cost per Year/Person Source: The Pew Center on the States

  12. State of CT–LT Balance Sheet

  13. State of CT – LT Balance Sheet Summarized for discussion purposes from page 29 of 6/30/09 audited statements

  14. Long-Term Health Over Time Zero -46,000,000,000 -48,000,000,000 -50,000,000,000 -52,000,000,000 -54,000,000,000 -56,000,000,000 -58,000,000,000 -60,000,000,000 -62,000,000,000 -64,000,000,000

  15. Budget basis

  16. Spending Cap • Basic Rule: • Budgeted Expenditures Must Equal Est. Revenues • Expenditure Limitations: • % increase capped at higher of: • Annual growth in personal income • Annual inflation • Excludes: Debt Service, Certain Grants, Mandates • Any Surplus must: • Reduce Debt or Increase the Rainy Day Fund • Exception by Gov. and 3/5ths Gen’l Assembly • (This has normally occurred in surplus years)

  17. 1-Time Fixes to Balance Budget • 2009: • $916 Million in Borrowing due 2012 to 2016 • $400 Million in Federal Stimulus Temporary Funding • 2010: • $1.3 Billion in “Rainy Day Funds” • $844 Million in Federal Stimulus Temporary Funding • $164 Million in Delayed Pension Payments • 2011: • $103 Million in “Rainy Day Funds” • $745 Million in Federal Stimulus Temporary Funding • $100 Million in Delayed Pension Payments • $647 Million in Borrowing paid with utility surcharges • $449 Million in “Carry forwards”

  18. Recommendations from the CPAs!

  19. Basis of Accounting We Got We Wanted Not for Operating Audit Scope Limitation Fund the ARC

  20. Our Recommendations for the State • Real “Rainy Day Funds” • Set a 10% to 15% threshold • No offsetting negatives! • Excess committed to pensions/OPEB Obligation • Strategic Planning including: • Long-term budgeting (5 to 10 years out) • Manage the Full Accrual Balance Sheet • It can no longer be business as usual

  21. We must FIX OUR FUTURE now! Stay connected at www.CTCPAs.org/fixfuture

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