OP-ED | With Tax Increases, How Can Connecticut Be Out of Cash?
by Vincent Candelora | Jan 9, 2012 10:45pm
(4) Comments | Commenting has expired
Posted to: Opinion
Groundhog day came a bit early at the state Capitol. The latest release of the Treasurer’s cash flow report showed that the state’s operating cash fell below zero, thus requiring the Treasurer to temporarily borrow from the state’s bond proceeds in order to continue to pay the bills. While this practice is an appropriate exercise of the Treasurer’s authority, it raises a red flag and certainly merits a discussion on why this happened.
When our check book balance drops below zero, Connecticut has the ability to use money from our capital account, namely bond proceeds earmarked for capitol projects, for operating cost. While this system creates efficiencies for our cash management, it certainly hides the fact when we run out of operating revenue. Two years ago, I sponsored legislation that requires the Treasurer, on a monthly basis, to report our bond indebtedness and cash flow to the legislature. Knowing and understanding the cash flow of any entity is critical to its overall health. Each year we go through great pains to have a balanced budget, but that’s only part of the equation. Knowing how much money is in our check book to pay our bills is just as important.
According to the Treasurer’s January report, we ran out of operating revenue in December and had to borrow from our bond funds to keep our lights on. The Treasurer claimed that during the months of November and December the common cash pool declined “consistent with seasonal patterns”, thus necessitating a temporary transfer of money from our bond proceeds. When challenged with the explanation, both the Treasurer and Governor’s offices failed to give an explanation for this occurrence. Rather, the Treasurer acknowledged that these type of transfers are rare, occurring once in 2009 and in 2003.
I am troubled by this transfer, however, given the timing. In 2009 and 2003, Connecticut ran out of cash subsequent to crashes in the stock market. When the market crashes, less tax revenue comes into the coffers so it makes sense that we didn’t have the money to pay our bills. No such incident occurred in November or December that would justify this temporary transfer. In fact, reports continue to indicate that the economy is on the upswing and state revenues are meeting projections. After raising $1.5 billion in new taxes, it defies logic that we would be running out of cash. I fear that one explanation may be that Connecticut is not achieving the savings projected in its current year budget. To that end, the legislature must work on creating more transparency in the executive branch’s reporting of lapses, savings, and expenditures so that we are not met with any more surprises.
State Rep. Vincent Candelora represents the 86th district which includes North Branford, East Haven, and Wallingford.
Tags: Rep. Vincent Candelora, republican, finance, bond proceeds, budget, taxes
(4) Comments
posted by: Careful | January 10, 2012 10:57am
Connecticut is out of cash because of Democratic party-controlled Pres. Obama-type of spending and taxing, led by the King of Politicians, Gov. Dannel Malloy, who idolizes Obama for being the biggest spending President in our history.
Malloy and his Democratic General Assembly, have our state—“between a rock and a hard-place,” and have refuse to consider any money-saving ideas from the Republican minority… just because they want them to know—who’s the boss!
Private industry—would fail—“if it was run into the ground by like it has been by Malloy, and his rubber-spending- stamps”—which is the reason Connecticut has no money—only debt, leading to more taxes.
posted by: larry williams | January 10, 2012 12:57pm
The ups and downs of the common cash pool have nothing to do with higher taxes. This guy either knows that and is just fooling us to try to make an irrelevant point. Or he does not know, and should not pose an some sort of expert on state finances.
posted by: ... | January 10, 2012 2:41pm
I would agree with Representative Candelora’s concern if he was not playing a bit of amnesia about November 2011.
Does Rep. Candelora not consider the freak snowstorm, which shut down much of the state an ‘incident’ that might have affected revenues/spending?
Many businesses and operations were shut down or running and lower capacity than average. Hundreds of thousands of homes were without electricity and resources that would affect state revenues through necessary payments/purchases.
Meanwhile, the state and 169 municipalities had to spend what have been record amounts on storm recovery for this year and this season as we waited for a declaration of emergency.
There is never a mention of how much money had to be temporarily borrowed to fund operating expenses, but I would not be surprised if they matched the unexpected burst of state spending on the snowstorm and a slight dip in revenue.
I will agree though with his message of greater transparency as long as he can specify which discrepancies he has viewed in his 4 years at the CGA under Rell, or what he has viewed so far under the first year of the Malloy administration.