While the planned New Haven-to-Springfield commuter rail line cleared a big fiscal hurdle Tuesday with $260 million in new state funding, it became the focal point of a new debate about state borrowing likely to be carried over into next year’s legislative session.

Though Gov. M. Jodi Rell supports the commuter rail line, one of her fellow Republicans on the State Bond Commission used the project Tuesday to protest a Rell-approved plan in 2009 to borrow $580 million from future capital projects to help government pay its bills.

“My criticism doesn’t lie with any of these particular projects. I think they all have merit,” Rep. Vincent J. Candelora of North Branford, ranking House Republican on the Finance, Revenue and Bonding Committee and a member of the bond commission, said during Tuesday morning’s meeting.

“But my concern is still that … we’re borrowing from our bond projects for the purposes of operating government,” he said. “And there really isn’t an open and transparent method of doing it. And so I am concerned that we’re putting Connecticut’s operating accounts upside down.”

rell 8-18-10

Gov. M. Jodi Rell: ‘Did we need to do this?’ (Mark Pazniokas)

The governor hopes Connecticut’s $260 million commitment, approved 9-1 on Tuesday by the commission, will enable the state to win $220 million in competitive federal transportation grants.

The rail project, which state Transportation Commissioner Jeffrey Parker said could end up costing about $1 billion before reaching completion, was recommended as a crucial economic development tool more than seven years ago by the state’s Transportation Strategy Board. It involves providing train service during the morning and afternoon peak travel periods along an existing Amtrak-owned, 62-mile rail line linking New Haven and Springfield and nine other Connecticut communities, including Hartford, between them.

The line is single-track in some locations in Connecticut and double-track in others, including all portions of the line in Massachusetts. Plans call for bi-directional weekday service during both morning and evening commuting periods.

Candelora, who voted in protest against the rail project and every other bond commission agenda item Tuesday, first questioned last week why the $580 million in short-term borrowing – approved in April 2009 when the state was more than $1 billion in deficit – wasn’t being used to support the initiative.

Sen. Andrew W. Roraback of Goshen, ranking GOP senator on the finance panel and also a member of the commission raised similar concerns. And though he voted for the commuter rail funding, Roraback joined Candelora in casting a protest vote against $520 million in new bonding for other capital projects.

“I did it to call attention to the impending moment of truth,” Roraback said. “When we begin the next (fiscal year) we are going to be very cash poor.”

GOP lawmakers already have criticized Rell and the legislature’s Democratic majority for ordering $2 billion in borrowing over the past year to cover government operating costs.

State Treasurer Denise L. Nappier, who developed the 2009 borrowing plan, told the commission Tuesday that without that infusion of $580 million, the state could not have paid all of its bills.

With Connecticut mired deep in recession, state government faced a budget deficit of just over $1 billion in April 2009. According to the treasurer’s office, that borrowing was needed to lift government’s cash balance above $700 million total. Weekly disbursements typically range between $220 million and $1.2 billion.

State government maintains a common cash pool, a system that effectively mingles tax revenues, receipts from fees, licenses and penalties, federal grants, and proceeds from borrowing, in one big account.

Nappier, who also serves on the bond commission, said borrowing against future capital projects enabled state government to receive lower interest rates that it would have received had it sought a more traditional loan to cover operating costs.

Nappier also disputed Candelora’s claim that the 2009 borrowing was secretive. “There have been frequent and public briefings on cash flow borrowing,” she said, adding one including a discussion between herself and Rell’s former budget director, Robert L. Genuario, covered by state cable television public access network.

The treasurer added that her office will refinance the debt next June, taking out long-term notes to pay off the short-term debt. Eventually, she added, all funds borrowed over the past two years will be assigned to specific capital projects.

“It’s not rocket science,” Nappier told Candelora.

But will the state’s cash pool have enough funds available immediately thereafter to replenish capital projects, or even shortly thereafter? Candelora responded, adding that if the economy slips again, it could be years before the capital program is made whole. “I just think we’re setting ourselves up for a problem,” he said.

After the meeting, Rell said Candelora’s concerns “were well taken,” noting that state government does not have a cash flow problem now. Although Rell had to sign off on borrowing the money, she appeared to be having second thought Tuesday.

“I truly profess that as I sat there listening to an explanation of this, I’m thinking did we need to do this? Did we not?” the governor added. “The treasurer’s office indicated that we did at the time.”

Meanwhile, Democratic and Republican lawmakers said the state’s emergency borrowing statute should be revisited during the 2011 General Assembly session, which starts in January. With state government facing a $3.37 billion deficit projection for 2011-12, a shortfall equal to nearly 20 percent of current spending, keeping a close watch on all borrowing is crucial, they added.

Roraback said he favors placing new limits on the amount and duration of emergency borrowing that can be ordered without legislative approval. “We have not only the right, but the responsibility to have a much better understanding of how the state manages its cash pool,” he said.

Rep. Cameron C. Staples, D-New Haven, co-chairman of the finance committee and also a bond commission member, said disputes of this kind might be avoided in the future simply by providing the commission with regular reports on the cash pool.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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