Years of budget gimmicks have left Connecticut with a billion-dollar deficit under normal accounting rules.
That deficit fell by one third last fiscal year, from $1.7 to $1.1 billion, largely due to a reduction in accounts payable owed. This shortfall represents the one-time cost of shifting to Generally Accepted Accounting Principles, as Gov. Dannel Malloy has promised to do.
Over the years, politicians from both parties have manipulated the state’s accounting methods. Rather than cut spending or raise taxes, past budgets changed the meaning of “spending” and “taxes.”
Legislatures pushed spending out of the year of the budget in question or pulled revenue into it.
Gov. Dannel Malloy and the General Assembly recently approved $750 million in borrowing to further plug the shortfall.
The additional bonding fits with another trend in state government: borrowing.
According to the most recent audit of the state budget just completed for fiscal year 2012, Connecticut’s bonded debt increased 36 percent in the previous five years, from $13.7 billion in 2007 to $18.7 billion, nearly the amount the state spends in a year.
That amounts to an average increase of $1 billion each year.
Just as the rest of the economy experienced an historic – and often disruptive – reduction in borrowing, the state borrowed more than $5 billion more.
In order to increase borrowing, the state needs to borrow more than it pays off in a given year, so the state not only continued to borrow. It also increased the pace of borrowing. Typical state bonds last for 20 years.
According to the audit, the state has made some improvements to its accounting software. The system won’t be able to generate monthly reports under GAAP, however, only year-end statements.
Auditors had to give the state an adverse opinion on its financial statements because they do not include three required sections: “a management discussion and analysis, notes to the financial statements and disclosure of infrastructure assets.”