State Treasurer Denise L. Nappier and House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, have resumed their fight over whether the state has a cash flow problem indicative of financial distress — or if politicians are clashing over semantics.

Nappier offered Thursday to meet with legislators to warn them about “misleading” statements from some lawmakers intending to distort cost-saving steps taken by her office.

Cafero, who arguably is the most vocal critic of Connecticut’s common cash pool practices, urged Nappier to appear before lawmakers and show why state government has dipped into its capital projects accounts to pay its operating bills for three months in a row.

Is it merely an odd fiscal coincidence, or an early sign of a bigger fiscal crisis?

“Something is up and we need to understand it now,” Cafero said Friday. “Treasurer Nappier’s response has been that we Republicans do not understand how the state’s finances are managed and we are ignorant of the budget process. We would like her to come to the legislature and explain this.”

Both the treasurer, a Democrat, and Gov. Dannel P. Malloy’s budget director, Benjamin Barnes, have balked at Cafero’s use of the term “borrowing” when describing transfers within the cash pool.

Connecticut operates from a common pool that mingles tax revenues, federal grants and receipts from fees and licenses with borrowed funds. The treasurer’s office is allowed to transfer funds between operating and capital programs. Though it is done infrequently, it has been employed on past occasions at year’s end or on other occasions when bills exceed tax and other operating fund receipts.

Nappier notified the Finance, Revenue and Bonding Committee in early January that some transfers from capital programs had occurred in December to cover operating expenses. And she informed the committee Thursday that additional transfers occurred in January and February.

But these transfers don’t cost the state any interest payments, and shouldn’t be referred to as borrowing, Nappier and Barnes have said.

“I want to clearly emphasize that internal transfers are quite different in structure and cost from borrowing in the capital markets,” Nappier wrote to the committee this week, adding that formal borrowing also requires approval from the governor and legislature. “Simply put, the state treasurer cannot unilaterally borrow money from the capital markets.”

Nappier, who charged in January that Republican legislators were distorting the transfers in published op-ed pieces, wrote Thursday that they either are uninformed, or are playing partisan games.

“Either the legislators who wrote the flawed opinion pieces do not understand the nuances of how we manage the state’s cash, or they chose to purposely mislead the general public for political ends.”

During the past few years, several Republican have objected to the common cash pool system, arguing it allows administrations to hide problems with the operating budget.

Cafero noted that these transfers are not indicative of a healthy fiscal situation, despite more than $1.5 billion in new state taxes enacted last spring to help close the largest budget deficit in state history.

According to Nappier’s office, the state had just under $196 million in its operating cash fund entering December. But Connecticut also had roughly $1.3 billion in accounts for capital projects being financed through bonding.

Weekly disbursements from the entire common pool average approximately $540 million, according to the treasurer’s office.

By early January, the level of operating cash had fallen to $67.1 million, a level Cafero called “perilously low.” By the end of March, the level of operating cash had risen to $382.8 million.

An appearance by Nappier before the legislature’s Finance and Appropriations committees “would be beneficial and could clear the air,” Cafero added.

The state’s finances are far better than they were one year ago, when a deficit of as much as $3.67 billion — about one-fifth of the entire budget — was projected for the 2011-12 fiscal year.

But the Malloy administration has faced as number of smaller warning signs in recent months as fiscal analysts for his administration and the legislature have downgraded revenue forecasts.

State Comptroller Kevin P. Lembo and the legislature’s nonpartisan Office of Fiscal Analysis are projecting deficits for the current year of $20.7 million and $161 million, respectively. Malloy’s budget office says finances are running $35.9 million in the black.

And Moody’s Investors Services, a leading Wall Street credit rating agency, downgraded Connecticut’s rating in January, citing a heavily loaded state credit card, huge debts in pension and retiree health care programs, and a depleted emergency reserve.

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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