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FISCAL ACCOUNTABILITY OF STATE GOVERNMENT
15 February 2007FISCAL ACCOUNTABILITY OF STATE GOVERNMENT, this is the title of a Power Point presentation given by the Office of Policy and Management to the Appropriations Committee and the Finance, Revenue, and Bonding Committee. November 27, 2006.
I have referenced it before, it is a very interesting presentation, but what is most telling is the dire warnings it gives which have been largely ignored. With the exception of The Teacher’s Retirement Funding (unfunding) most of the conclusions are not probably well know outside of the state government.
Let’s look at Teacher’s Retirement. This is from the presentation, so these numbers are the Office of Policy and Management’s numbers. This chart compares Connecticut to all 50 states with regards to funding of the retirement plan. Connecticut is 49th out of the 50 states with an unfunded liability of 12.7 Billion Dollars, yes that is Billions with a “B”. Unfunded liability is what the actuaries have calculated the state must contribute in order for the fund to be self sustaining and solvent. In other words it is not.
2005 STATE RETIREMENT SYSTEM STATISTICS
STATE EMPLOYEE AND TEACHERS’ SYSTEM COMBINED
The fund is only funded to ~59% of it’s actuarial requirement. Now Governor Rell’s budget does address this to a degree. My point in bringing this up is we have some serious accounting issues in this state that need to be addressed and proposing massive new taxes for other issues is really quite befuddling.
The summary slide is very revealing and sobering.
The state is projected to experience a surplus at the end of FY2006-07.
Projected spending will exceed available room under the expenditure cap in fiscal years 2007-08 and forward if spending is left unchecked.
Beginning in fiscal year 2007-08 the state will experience significant deficits if spending remains unchecked.
Debt service as a percent of budget expenditures will continue to grow despite maintaining general obligation allocations and issuances fixed at the current level.
In order to achieve a significant reduction in debt service as a percent of budget expenditures, reductions in bond issuances would be required.
Energy costs have risen almost 100% between FY 2000 and FY2007.
Major issues and trends impacting the state’s fiscal situation include: Pharmacy costs, personnel costs, retirement benefits, expenditures related to the Department of Children and Families, the Department of Correction, Department of Education, and Department of Mental Retardation.
The state faces significant long-term obligations including debt, unfunded pension liabilities and unfunded post-employment retirement benefits.
The ability of the State to deal with unfunded liabilities will become increasingly difficult due to a “demographic deficit” – CT’s median age increases 10% through 2030, with significant growth in age groups over 65.
The phrase “if spending remains unchecked” is telling and the last line dealing with the “demographic deficit”.
High Taxes are driving the up and coming middle class out of the state, this is going to make it “increasingly difficult” to “deal with unfunded liabilities”. Let me spell it out, the middle class pays the taxes, the young people who will make up the middle class have LEFT, so it is going to be tough to pay for the increasing unfunded (they already exist) liabilities.
And we already have a very high debt per capita in this state.
It appears to me this state has been fiscally mis-managed.
This presentation has enough material to keep this blog going for a long time. Stay tuned.
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