Cash-starved state government may be forced to borrow
HARTFORD -- The state is only weeks away from borrowing money to pay for monthly operating expenses because its cash accounts are depleted to near-record lows.
Minority Republicans charged that bloated state spending is the culprit, along with savings predicted in last year's concession package with public employee unions that have not been realized. They warned that the cash pool for monthly payments that state Treasurer Denise Nappier promised to keep at about $700 million has averaged only $122 million over the last six months. She recently acknowledged to minority Republicans that her department plans to borrow money to pay monthly operating costs.
Democrats downplayed the problem, but admitted there will be challenges when the General Assembly meets in January for its budget-making session.
State Rep. Vincent J. Candelora, R-North Branford, a member of the Finance Committee, said Friday that Nappier has not been forthcoming about borrowing plans but, judging by the state's finances, it should occur this summer.
"In my estimation, from the burn rate that we're going at, it's conceivable by August we would be looking at borrowing money," he said. Part of the problem is the projected $220 million surplus of 2011 that was applied to the current budget that expires on June 30, but which hasn't materialized.
"By taking $220 million from a checkbook that had zero dollars in it, we've exacerbated the problem," he said in an interview.
"In the coming legislative session, those of us who are fortunate enough to be back are going to be faced with a challenge," said state Rep. Sean Williams, R-Watertown, ranking member of the Finance Committee, during a half-hour committee meeting Friday to adopt revenue estimates. "The challenge is going to be how to close what may very well be a budget deficit. We are not in a better position than we were several months ago."
The revenue estimates include a $350 million shortfall in personal income taxes. But gasoline sales tax revenue went up a projected $62 million.
State Sen. Antonietta Boucher, R-Wilton, a committee member, said many are "still reeling from" last year's record tax hike. "It makes me wonder if people have gotten into their cars and headed south or west, to states or places where the cost of their taxes is substantially less," she said.
State Sen. Gary D. LeBeau, D-East Hartford, said that most of the higher income taxes are being paid by the state's wealthiest residents. "A couple, each making $100,000 apiece, will only have their taxes increased by $17 under the tax plan that we passed," he said.
Sen. Eileen M. Daily, D-Westbrook, co-chairwoman of the committee, conceded that lawmakers would rather not borrow money. "Could it be possible that we have to? It could be," she said in an interview. "For now, we're all right with the internal borrowing we've done in the past."
The nonpartisan Office of Fiscal Analysis on Friday released a report requested by Republicans, noting that about $50 million in pension contributions -- half from employees and half from the state -- have been withheld over the last year and retained in the state's cash pool for the $20.5 billion budget.
In a statement on Friday, Nappier said that pension balances are "relatively small," making long-term investments impractical. But they are not used to pay other obligations, she said, adding that until contributions to the retirement funds "materially" outpace the payment of benefits, funds will be kept in the cash pool.
"The value of the trust fund assets reported by OFA on June 21, $49.6 million, does not take into consideration the expenditures to date," she said. "Indeed, the fund currently has a negative cash balance of $13.6 million, which means that retiree health expenses have exceeded appropriations and employee contributions as of this particular point in time."
Nappier recently reported that the state's cash pool "has fallen substantially" to $121 million on May 26. Last year at that time, it was $895 million. The state spends about $2 billion a month to keep government working.