Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Vaccine Info
    Money
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Governor’s budget needs $300M in borrowing to stay in balance

  • Money
  • by Keith M. Phaneuf
  • February 20, 2015
  • View as "Clean Read" "Exit Clean Read"
Budget director Benjamin Barnes testifies before the legislature's Appropriations Committee

CT-N

Budget director Benjamin Barnes testifies Thursday before the legislature’s Appropriations Committee.

Gov. Dannel P. Malloy’s new budget would need more than $300 million in borrowing to cover operating costs over the next two years, if projections from nonpartisan analysts and the state treasurer’s office are correct.

The governor’s budget relies on a controversial fiscal practice that faces increasing scrutiny and drives up the interest rates Connecticut pays to borrow funds for school construction and other capital projects.

And while Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, said there is merit to reforming state practices regarding “bond premiums,” he also challenged critics to identify $300 million in spending cuts if they want to avoid the premiums.

The Democratic governor’s budget includes $1.65 billion next fiscal year, and $1.77 billion in 2016-17, to cover debt service in the general fund.

But those appropriations together are $305 million shy of what state Treasurer Denise L. Nappier – also a Democrat – said is needed to cover Connecticut’s debt obligations. And they are $328 million less than what the legislature’s nonpartisan analysts estimate is necessary.

Malloy’s budget would rely on borrowed funds to make up the difference.

“Why is that (the premiums) not mentioned in this year’s budget book?” Sen. Robert Kane of Watertown, ranking GOP senator on the Appropriations Committee, asked Barnes Thursday as he briefed lawmakers on the budget. “Are we using that money to balance the budget?

“This has been a longstanding practice,” Barnes responded. And while he added that he understands proposals to change the use of bond proceeds, the administration would expect critics to find $300 million in spending cuts to avoid the need for more revenue.

“This is not the year to do that, in my opinion,” he said, adding that the governor already has made tough choices that include difficult cuts in social services and health care programs.

At issue is a tool that helps the treasurer’s office market the state bonds sold on Wall Street.

The state, in some instances when issuing bonds, will pay a higher interest rate than originally planned in return for a premium – extra money to the state in addition to the bonds’ face value.

Republican legislative leaders say the state should pay cash to cover its debt payments, take premiums only when necessary to attract investors, and use the proceeds to accelerate debt reduction.

But if the state intentionally budgets too little to cover its obligations, it has to dole out premiums in hefty amounts – and drive up borrowing costs for many capital projects in the process – just to balance its books.

Republican legislative leaders have charged Nappier with taking premiums unnecessarily and in excess throughout Malloy’s first term to help close budget deficits – a charge the treasurer denies.

Nappier insists that the bond market drives when premiums are necessary. The treasurer also has said that when interest rates are low – which they have been throughout Connecticut’s lengthy recovery from The Great Recession – investors are more likely to pay premiums and insist upon higher rates of return.

But GOP lawmakers counter that Connecticut has paid premium rates far more frequently since Malloy took office in 2011 than it did under the prior administration of Republican Gov. M. Jodi Rell.

From the 2005 through 2010 fiscal years, the state took, on average, $36 million per year in premiums, according to records from the treasurer’s office.

Even in 2009 and 2010, when Connecticut’s economy was slumping badly – and interest rates were low – premiums averaged $37.5 million per year.

In the first four fiscal years of the Malloy administration, from 2012 through 2015, premiums have averaged almost $87 million.

The 2011 fiscal year was split, with Rell serving as governor during the first six months and Malloy during the final six. The state took $74.6 million in premiums that year – almost all of it occurring during the Malloy administration.

And Malloy’s new budget would require premiums that would drive his average up even higher.

Nappier also has said it is up to the legislature and the governor to decide how those premium proceeds are used.

Still, both she and Republican leaders have proposed legislation this year to ensure premiums could not be used to replace operating funds.

Senate Minority Leader Len Fasano, R-North Branford, and Deputy House Minority Leader Vincent J. Candelora, R-North Branford, also are pushing for increased reporting requirements that would compel the treasurer to notify lawmakers whenever premiums are taken, and to report on the interest rates involved.

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Keith M. Phaneuf A winner of numerous journalism awards, Keith Phaneuf has been CT Mirror’s state finances reporter since it launched in 2010. The former State Capitol bureau chief for The Journal Inquirer of Manchester, Keith has spent most of 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. A former contributing writer to The New York Times, Keith is a graduate of and a former journalism instructor at the University of Connecticut.

SEE WHAT READERS SAID

RELATED STORIES
CT hasn’t started collecting new payroll tax from state workers
by Keith M. Phaneuf

Connecticut established a new payroll tax surcharge on Jan. 1 but still isn't deducting it from state workers' paychecks.

Lamont’s budget offers another round of tax amnesty
by Keith M. Phaneuf

Gov. Ned Lamont’s proposal waives penalties and caps interest at 3% over each of the next two fiscal years.

Senate sends data center incentives and town aid pledge bills to Lamont’s desk
by Keith M. Phaneuf

Senate endorsed an omnibus fiscal bill that lays the groundwork for a major boost in PILOT aid to many municipalities.

House approves big municipal aid pledge, tax incentive bills
by Keith M. Phaneuf and Mark Pazniokas

The House approved bills Wednesday pledging $100 million-plus in new municipal aid and offering tax incentives to attract data centers.

CT legislature poised to make early budget pledge to help cities and towns
by Keith M. Phaneuf

The state House is expected to approve more than $100 million in new, annual PILOT grants to municipalities.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion How do we show that we value teachers? By listening to them.
by Sana Shaikh

When I was graduating college, my friends’ futures were brimming with impressive labels: Google, Facebook, McKinsey, Bain, PhD, MD, Fulbrights – the list of professional excellence was seemingly never-ending. When I said that I was becoming a teacher, I got puzzled looks – “Why would you be a teacher?” “If you can’t do, teach,” I heard. The nonchalance about my professional trajectory was unsettling. What’s more? Nothing has changed in the last ten years.

Opinion Sports betting in Connecticut: Can’t all the brands just get along?
by Bill Field

When it comes to legalized sports betting in Connecticut, it’s time that all of the parties gathered in a room and hammered out an agreement that works for everyone. The adage of everyone benefiting from a rising tide hasn’t resonated in the past two and half years. 

Opinion COVID-19 will push nursing home design forward
by Myles R. Brown

Over 40 percent of American deaths attributed to COVID-19 have been nursing home residents. Outdated nursing home designs contributed to the scale of this tragedy in Connecticut. Many design changes that could have prevented the spread of COVID-19 were already needed to improve the well-being of nursing home residents. The pandemic has made these issues impossible to ignore.

Opinion Let gig economy workers pursue options
by Nicole Petruzzi

In response to your February 22 story, “In an evolving economy, lawmakers take roles once played by unions:” Like many Connecticut workers, I struggle to make ends meet for my family, even when working full time. This last year has been a particularly hard time. I started looking for a part-time job to supplement my income, but I was worried that even something part-time would take away precious and needed time with my family.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO