The report card the state has received from The Connecticut Society of Certified Public Accountants is alarming.
Connecticut ranks 50th in personal debt, 48th in debt measured a share of personal income, 49th in pension funding, and 49th in the amount of working capital it has in hand.
Marcia Marien, president of the Connecticut Society of Certified Public Accountants, put it this way when she was invited to give a presentation at the state Capitol: “We’re not going broke. We’re broke right now.”
Over the last five years, state revenues have increased 5 percent, while state spending has increased 28 percent. And although stimulus funds provided by the federal government have helped some states to get by, federal funds – tax money withdrawn from the private marketplace and distributed to states and favored industries in the form of grants or credits – are not likely to continue because, according to Ms. Marien, “The federal government doesn’t have the resources, either.”
If the federal government did have a surplus, it might more efficiently provide stimulus funds through the expedient of tax reductions; the least harmful way to stimulate the economy is by leaving economic resources in the pockets of people who most efficiently decide which companies will prosper or fail though the purchasing choices they make. When market winners and losers are decided by political federal and state bureaucracies, the funds necessary to support the winners are a perpetual drain on both the economy and taxpayer resources.
Connecticut’s CPAs have singled out for attention a number of pressing issues:
• State spending has increased by 227 percent since 1980 from $4,400 per household to $10,000 per household.
• The number of state employees expecting pension and after retirement benefits is a stunning 205,000. “About 185,000 Connecticut taxpayers account for more than 60 percent of the state’s income tax revenues. This second group can leave Connecticut, and many probably will if their tax burden increases dramatically.” These proportions strongly suggest that if Connecticut has a revenue rather than a spending problem, as so many union leaders now negotiating pay and benefit packages with the administration of Gov. Dannel Malloy persistently urge, Connecticut is not likely to increase revenue from already besieged taxpayers.
• The CSCPA reminds us that “Connecticut’s fiscal problems are structural. Budget deficits aside, we spend more that we take in, we have legal obligations that will further escalate spending, and Connecticut’s aging population will pressure the budget still more. At the same time, we need to fund essential services. The state has made unfunded post-employment benefit promises to its employees that will soon prove extremely difficult if not impossible to keep.”
In addition, the state’s “fund balance,” the amount of money the state of Connecticut would have 60 days after the end of the fiscal year if the government were to stop doing business, an accounting measure of the state’s short term financial health, is a NEGATIVE figure of $922 million. A healthy fund balance would be ten percent of Connecticut’s annual expenditure. The state’s present fund balance is a negative five percent of expenditures.
And Connecticut’s long term financial health is worse. The state’s total liabilities amount to $70 billion – 4.5 times its assets. Connecticut has the highest debt per capita of all the 50 states; as a percentage of personal income, we lag behind only two states, Hawaii and Massachusetts.
Now then, companies considering a move into the state and Connecticut companies considering out migration to other states that ARE NOT ALREADY BROKE -- whether contiguous to Connecticut or not -- are likely to weigh seriously such reports as have been issued by the CSCPA, an organization that has, unlike silver tongued politicians, no political dog in the national fight to retain and attract businesses.
The CSCPA report is a vivid and accurate description of the economic state of the state. THIS is the defective state product that Governor Dannel Malloy hopes to sell to portable businesses as he begins to keep his promise to merchandise Connecticut both nationally and overseas. Mr. Malloy has shown himself to be an able salesman, Most elected politicians are smooth talkers, which is how they attain office. However, the writing on this wall can only be changed when the state’s assets exceed by a comfortable margin its deficits. And to lead the state from its Babylonian captivity, Mr. Malloy must first convince those here at home in his own party who have been largely responsible for running up the state’s debt and exhausting its assets that WE HAVE A SPENDING PROBLEM.