Financial ACCOUNTABILITY OF STATE GOVERNMENT

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2. Presentation. 3. Budgetary SUMMARY OF FUNDS(in Millions). 4. Anticipated BALANCE OF THE GENERAL FUND. 5. Weakening ECONOMIC CONDITIONS. 6. CONNECTICUT EMPLOYMENT IS FALLING. Source: Moody\'s Economy.com as of October 27, 2008 and CT Dept. of Labor. Combined CT Jobs Lost Since December 2007 .

Presentation Transcript

Slide 1

Monetary ACCOUNTABILITY OF STATE GOVERNMENT Presentation Prepared for the Appropriations Committee and the Finance, Revenue, and Bonding Committee by the Office of Policy and Management November 18, 2008

Slide 2

INTRODUCTION

Slide 3

FINANCIAL SUMMARY OF FUNDS (in Millions)

Slide 4

PROJECTED BALANCE OF THE GENERAL FUND

Slide 5

DETERIORATING ECONOMIC CONDITIONS

Slide 6

CONNECTICUT EMPLOYMENT IS FALLING Cumulative CT Jobs Lost Since December 2007 Source: Moody's Economy.com as of October 27, 2008 and CT Dept. of Labor

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UNEMPLOYMENT RATE IS RISING Source: Moody's Economy.com as of June 25, 2007 and October 27, 2008

Slide 8

THE HOUSING MARKET CONTINUES TO SLOW According to the Warren Group: Median deal cost of a solitary family home in CT is down 7.7% to $277,000 in August 2008 contrasted with August 2007 Home deals in CT have declined 26.4% amid the initial 8 months of 2008 contrasted with a similar period in 2007 Source: Moody's Economy.com as of June 25, 2007 and October 27, 2008

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A SERIES OF UNFORTUNATE ECONOMIC EVENTS

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STOCK MARKET DECLINES the stock exchange has fallen more distant than in 2000 S&P Peak Dates: March 24, 2000 and October 9, 2007

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CAPITAL GAINS WILL DROP Capital Gains Realizations Reported by CT Residents and Return on the S&P (In Millions) Note: YTD Through 10/24/08 Sources: Department of Revenue Services and Internal Revenue Service different years

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INCOME TAX GROWTH WILL SLOW

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CT WILL BE HIT HARDER BY A CONTRACTION IN THE FINANCIAL SECTOR Whether measured by business, yield, or salary, CT is excessively reliant on the money related division contrasted with the country Source: Bureau of Economic Analysis and Internal Revenue Service

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PERSONAL INCOME TAX TRENDS

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SALES AND USE TAX

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MAJOR COST DRIVERS ~ LONG TERM OBLIGATIONS ~ REVENUE & EXPENDITURE TRENDS

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WATCH LIST FY2009 AREAS OF CONCERN (In Millions) General Fund Special Transportation Fund

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STRUCTURAL HOLES IMPACT ON FISCAL 2010 - GENERAL FUND (In Millions) * no statutory order to finance in FY2010

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LONG-TERM OBLIGATIONS The state's long haul commitments add up to $57.6 billion, up 6.2% from a year ago's accounted for measure of $54.2 billion This likens to around $16,626 for each man, lady and kid in Connecticut, up $1,126 from a year ago's accounted for measure of $15,500 In correlation, add up to Personal Income Tax accumulations in FY 2009 may be $7.435 billion

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DEBT BURDEN COMPARISON

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DEBT SERVICE % OF SALES TAX GENERAL AND TRANSPORTATION FUND DEBT SERVICE EXPENDITURES

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CONNECTICUT'S BOND RATING CURRENT GENERAL OBLIGATION BOND RATING

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UNFUNDED PENSIONS TEACHERS' RETIREMENT SYSTEM CONTRIBUTIONS Millions

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UNFUNDED PENSIONS CONNECTICUT TEACHERS' RETIREMENT SYSTEM AS OF 6/30

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STATE EMPLOYEES RETIREMENT SYSTEM CONTRIBUTIONS TO THE STATE EMPLOYEES RETIREMENT SYSTEM (In Millions)

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UNFUNDED PENSIONS STATE EMPLOYEES RETIREMENT SYSTEM AS OF 6/30 Note: the 2008 confirmed valuation has not been issued

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2007 STATE RETIREMENT SYSTEM STATISTICS STATE EMPLOYEE AND TEACHERS' SYSTEM COMBINED

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STATE EMPLOYEES PENSION & HEALTH INSURANCE – ALL FUNDS SERS & HEALTH INSURANCE EXPENDITURES As Of 6/30 ⇝ Note: Retiree Health incorporates balances for the Medicare Part D Employer Subsidy beginning in FY2007

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GROWTH IN SIGNIFICANT STATE EXPENDITURES

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OTHER POST EMPLOYMENT BENEFITS

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DEPARTMENT OF SOCIAL SERVICES MEDICAID EXPENDITURES (In Millions)

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DEPARTMENT OF EDUCATION COST SHARING GRANT (In Millions)

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SUMMARY OF LOCAL AID ESTIMATED FORMULA GRANTS TO MUNICIPALITIES (In Millions)

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COST DRIVERS OTHER FY2010 & FY2011 - BIENNIAL BUDGET ISSUES Age of Jurisdiction Medicaid Funding Pension Issues – Revaluation, Pension Obligation Bond Requirements UConn Health Center Health Care Worker Contracts termination – Nursing Homes – Spring 2009 Private Provider Increases Energy State Agency Costs Recent Legislation and Block Grant activity Department of Education-Implementation of "Sheff v. O'Neill" impetus programs Sunset of biennial tops on real instruction stipends, similar to Adult Education and Transportation Special Transportation Fund Construction Cost Escalation Unknown Federal Commitments

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THE BUDGET RESERVE FUND ~ USE OF SURPLUS

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BUDGET RESERVE FUND BALANCE

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CONSEQUENCES OF AN INSUFFICIENT BUDGET RESERVE FUND Since the $594.7 million Budget Reserve Fund Balance in FY2001 was lacking the state needed to attempt various draconian measures to adjust the financial plan, for example, Deficit financing of $319 million Implementation of an Early Retirement Program Lay-offs of more than 2,500 representatives Increase the Personal Income Tax rate by 11% from 4.5% to 5.0% Increase the Cigarette Tax by 200% from $0.50 to $1.51 per pack Lower the apparel exception on the business charge from $75 to $50 per thing Securitized the Energy Conservation and Load Management and Clean Energy Funds to raise a one-time $194 million Closed admission to the Child Care Program Limited the proceeded with scope under Temporary Family Assistance Reduced repayment levels to medicinal suppliers

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USE OF GENERAL FUND SURPLUSES FY1992 to FY2003 $3,392.0M FY2004 to FY2008 $3,716.3M

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ECONOMIC AND DEMOGRAPHIC TRENDS

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SIGNIFICANT DEMOGRAPHIC TRENDS Projections of The Population in Connecticut (Mid-Year Resident Population In Thousands)

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DEMOGRAPHIC TRENDS

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HOUSING, MORTGAGES AND CREDIT QUALITY

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ECONOMIC INDICATORS ASSUMPTIONS USED TO DEVELOP REVENUE ESTIMATES

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FIVE YEAR BOND PROJECTIONS

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PROJECTED GENERAL OBLIGATION BOND ALLOCATIONS

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DISTRIBUTION OF GO BOND FUND ALLOCATIONS ACTUAL FY2004 – FY2008 PROJECTED FY2009 – FY2013

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SUMMARY

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SUMMARY The state is anticipated to encounter remarkable shortages toward the finish of 2009-10, 2010-11 and 2011-12 in view of current administrations asks for The utilization of one-time incomes to bolster on-going projects and ventures adds about $500 million to these anticipated deficiencies. The execution of the pay expense is altogether affected by occasions in the budgetary markets which have shown themselves to be to a great degree unstable, accordingly expanding the instability of this income source Projections demonstrate that spending will surpass accessible room under the use top in monetary years 2009-10, 2010-11 and 2011-12 Current Services asks for FY2009-10 and FY2010-11, and FY2012 Projections demonstrate that spending will surpass accessible income without further activity The spending hold support adjust is beneath the statutorily required 10% for 2007-08, putting the state at hazard in the flow financial atmosphere Debt administration will proceed to develop and devour a huge part of the financial plan in spite of endeavors to keep up general commitment designations and issuances at the momentum level Estimated State stipends to neighborhood governments increment fundamentally from FY 2008-09 through FY 2011-12 Other critical cost drivers which include: expenses of work force benefits including post-business benefits, subsidizing required for unfunded annuity liabilities, and consumptions identified with the Department of Social Services and the Department of Education The state faces huge long haul commitments including obligation, unfunded annuity liabilities and unfunded post-work retirement benefits which are evaluated to surpass $57 billion altogether

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