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advocacy community education
7
Connecticut is
broke.
Not
going broke, but broke right now.
did not define the terms well enough
when setting up the constitutional
amendment in 1992 and we can, and
usually do, over-rule the safeguards.
In the past five years, the revenues
including three years of federal stimu-
lus funding have increased by about
five percent. Spending during that
same period has increased 28 per-
cent. We "balanced" the budget by
taking out more debt, delaying
required pension payments, and using
the rainy day fund. The federal stimu-
lus funding ends on June 30, 2011.
The debt payments begin on July 1,
2011. We are at the edge of a tremen-
dous funding cliff.
Using figures estimated by the
Connecticut Office of Fiscal Analysis,
at June 30, 2014 our fund balance (the
measure of working capital) will be
approximately an $11 billion deficit.
This is 55 percent of our annual expen-
ditures. This means that, if we don't
pay any bills for the next fiscal year so
we use that year's money to pay our
June 30, 2014 bills, we will need to wait
until January 2015 to start paying our
July 1, 2014 payroll and bills.
Our Recommendations
We have to remember that our expert-
ise and credibility as certified public
accountants lies in the analysis of the
financial statements. For the greatest
impact, we want to limit our recom-
mendations to that area. We are rec-
ommending:
The state use Generally Accepted
Accounting Principles (GAAP) for
budgeting. It is important to note that
in a government, both the full accrual
and modified accrual basis of account-
ing can be considered GAAP. We are
asking for the full accrual basis.
If we were to change to the modified
accrual basis, the biggest change
would be converting our expenditures
from a cash basis to an accrual basis.
Payments toward the pension and
OPEB liabilities would still be based on
the cash paid and not the actuarially
required contribution (ARC). Debt
would still be considered income.
For these reasons, a full accrual
basis would be the best indication of
how we are progressing for our long-
term health. (We understand that this
will need to be phased in to comply
with the balanced budget require-
ments in our state constitution.)
(continued on next page)
President Marien (standing) gives a sneak preview of her presentation to Shelley Chenonceau,
administrative assistant at Norwich Community Development Corporation (NCDC), as registrants arrive.