STAMFORD, Conn. According to a recent report from the state treasurers office, Connecticut has been borrowing millions of dollars to cover its everyday operating expenses and state employee salaries, regardless of the $1.8 billion tax increase that was imposed this year.
The states cash on hand has also reached dangerously low levels, prompting the Republicans to call for a hearing before the Finance and Appropriations committees to look further into the matter and investigate Connecticuts fiscal health.
Without surprise, the state treasurers report states exactly what the House Republicans in Connecticut have been saying for quite some time: Our state is borrowing to cover for daily expenses and for keeping state government running.
In the report dated Jan. 3, State Treasurer Denise Nappier admitted that, Bond proceeds were borrowed for the common cash pool during December. Though this was the first mention of borrowing in her regular reports, we and our legislative colleagues charged that borrowing was in practice as early as two years ago. Nappier dismissed the assertions then as political posturing, insisting there were no borrowed monies used for operating expenses in the two years since the Legislature mandated that she submit the regular reports to the Legislature.
On Nov. 26, the states cash balance fell to $195 million, just 13 percent of the states available cash. In a previous report, Nappier stated that the cash level of $600 million then was insufficient. $600 million, while substantial on the surface, is lower than the cash balance necessary to ensure the adequate and timely coverage of the states obligations to municipalities, state beneficiaries, vendors and employees.
The $195 million would pay for roughly 2 1/2 days of expenses. Connecticut has the highest debt per capita of any state in the country.
Keep in mind, on June 4, 2010, Fitch Ratings Services downgraded the states credit because of excessive borrowing to cover operating costs. This report shows Connecticut has not heeded the warning of the rating agencies, and we now risk further downgrading.
"The states credit downgrade reflects the states reduced financial flexibility, illustrated by its reliance on sizable debt issuances during the current biennium to close operating gaps, the agency wrote, explaining its decision to lower the rating from AA+ to AA.
Nappier also dismissed the downgrade and not too long after the change, we were faced with the governors budget and the massive $1.8 billion tax hike.
- State Rep. Michael Molgano
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