Reclaim the Purse Strings

This weekConnecticutwas dealt a blow with a downgrade of its credit rating by Moodys Investor Service.  After raising the issue on the state’s cash flow problems one month ago and based upon the administration’s harsh response, I paused a bit and thought maybe I was off base in my analysis.  Ultimately, however, the numbers don’t lie and Moodys certainly knows numbers.  In December, Connecticut’s checking account balance slipped into the negatives, and the state temporarily borrowed from our savings to pay our bills.  For me, this event began to paint a familiar picture that our budget may not be as healthy as presented.  On January 17^th, the legislative Office of Fiscal Analysis and the governor’s Office of Policy and Management indicated revenues were off by nearly $95 million in Fiscal Year 2012 and $139 million in Fiscal year 2013.  Ultimately, our budget surplus has been reduced to zero.  These two events in tandem give me even greater concerns about Connecticut’s overall budget health because revenues have declined by .5%, but our cash flow projections (the money in our checkbook) dipped more than 1%, or .5% greater than our projected revenue decline.  If our checkbook balance is draining more quickly than our revenue decline, one must ask, are we writing too many checks?  It seems that we are.  Moodys cited the high debts levels, huge unfunded pension plans and skyrocketing benefits for retirees as the reasons for downgrading the state’s credit.  Rather than address the issue at hand, the Governor’s fiscal office chose to personally attack a 100 plus year old credit rating agency by stating, “Moody’s has responded with a downgrade intended to satisfy their internal corporate need to deflect attention from their historic lack of credibility.” Connecticut’s state employees retirement system (SERS) and teachers retirement system (TRS) had funded ratios of 44% and 61%, respectively, as of June 30, 2010.  Connecticut maintains the highest indebtedness at $41,000 per capita.  In other words, Connecticut is just plain broke.  So what do we do about it? On February 8, the General Assembly returns to session.  We must reclaim the purse strings that the legislature handed over to the Governor in an unprecedented budget proposal that raised taxes by $1.6 billion.  We must begin to make real systemic adjustments to how government is run.  We need to bring more transparency to the process by requiring our agencies to report on actual budget savings, rather than just projections.  We need to stop using our bonding as an ATM for private companies in the name of job creation.  On January 30^th, the Bond Commission is voting to approve $290 million dollars to Jackson Laboratories in exchange for a few hundred jobs over ten years.  With such little return on investment, the Commission should rethink this deal. Governor Rell managed a $3.5 billion deficit without tax increases and without any downgrades in our credit rating.  How did she do it?  She canceled bond commission meetings, she reduced spending, and she implemented a hard hiring freeze.  This new administration can say that they are saving money and making cuts, but ultimately the numbers don’t lie.  Connecticut is broke and real reform is needed.