State used borrowed funds to meet expenses
By Ed Jacovino Journal Inquirer
Published: Saturday, January 7, 2012 12:53 AM
EST
HARTFORD — The state had to use borrowed money to boost its checking
account balance in December, a move that sparked a debate between Gov. Dannel P. Malloy, a Democrat, and Republicans who charge
the move indicates poor budgeting.
“The state treasurer acknowledged what we have been saying for some time: That
we are borrowing to cover daily expenses and keep state government running,”
House Minority Leader Lawrence F. Cafero Jr.,
R-Norwalk, said Friday. “It is outrageous that the Democrats rammed through the
largest tax increase in history and we are borrowing millions for state
employee salaries and to keep the lights on.”
Cafero was referencing a report from Treasurer Denise
L. Nappier in which Nappier,
a Democrat, said she took money raised by selling bonds and transferred it into
the state’s cash pool to prop up the operating budget. “Bond proceeds were
borrowed for the common cash pool,” her report says.
In a letter to lawmakers, she painted a rosier picture: “We temporarily
transferred bond proceeds to and from the common cash pool to address
mismatches in the timing of receipts and disbursements,” Nappier
wrote.
And Nappier added that the
transfers were done in a “formal and structured process” for managing the
state’s cash flow.
The issue points to a long-running Republican complaint that the state blends
revenue from different sources to hide budget problems, Cafero
said. Nappier’s report says the state ended November
with $195.7 million in the cash pool. That’s enough to run the state for about
two days, Cafero said.
Republicans had raised similar concerns in 2010 under Gov. M.
Jodi Rell, a Republican.
“This is not only mortgaging the future, this is the same fiscal slight-of-hand
that led to the downgrading of our credit,” Cafero
said. Fitch Ratings Services downgraded the state’s credit in June 2010 from
AA-plus to AA.
Malloy responded with a statement from budget director Benjamin Barnes. “Anyone
in business knows that cash and operations are not the same thing, and so
should Representative Cafero,” Barnes said. “The
budget passed by the legislature was balanced, and continues to be balanced
today.”
Reports from Barnes’ office and from Comptroller Kevin Lembo,
a Democrat, project the state finishing the fiscal year in June with about an
$80 million surplus.
Barnes said the cash shortfall was because the state had pushed payments across
calendar and budget years instead of following a set of rules known as
Generally Accepted Accounting Principles.
“If the state had followed GAAP all along, that money would be available, as
cash, to support operating costs, and even to reduce the cost of borrowing for
capital investments,” Barnes said.
He added that Nappier’s action wouldn’t affect the
state’s credit rating. “Treasurer Nappier is properly
and prudently managing the cash on behalf of the state and has done nothing
wrong,” Barnes said. “Her cash management practices will not jeopardize the
state’s credit rating, nor will they change the state’s debt service costs in
any way.”
Cafero dismissed Barnes’ explanation, saying the
accounting rules and the projected budget surpluses have
little to do with the cash flow problem. He said it was “like me talking about
the price of rice in China
to answer a question about the cost of gasoline in America.”
“What is the most scary thing is that the budget secretary is either
purposefully confusing the issue or … doesn’t understand it himself,” Cafero said.
He said the issue — and that the state’s cash on hand has steadily decreased —
shows that state agencies aren’t meeting projected savings goals built into the
budget.