HARTFORD, Conn. — A fiscal accountability report that projected deficits totaling $1.4 billion in fiscal years 2016 through 2018 immediately triggered partisan debate in Connecticut.
The author of the report, however, emphasized that the state is fiscally strong.
"Even though we're rated AA, we think of ourselves as a triple-A state. Investors know that Connecticut will pay back its bonds," state budget chief Benjamin Barnes said in an interview at his office, blocks from the capitol building.
The Office of Policy and Management, of which Barnes is director, projects deficits of $612 million in 2016, followed by $433 million and $376 million in subsequent years. According to Barnes, projected expenditure levels exceed the state cap by $96 million in 2016, and fall below the cap by $99 million and $107 million the following two years.
Barnes said OPM projects a $135 million surplus for 2014 and $35 million for the following year.
Moody's Investors Service rates Connecticut's general obligation bonds Aa3, while Fitch Ratings, Standard & Poor's and Kroll Bond Rating Agency assign equivalent AA ratings. While three rating companies maintained stable outlooks, Fitch in July revised its outlook to negative, citing budgetary stress amid continued economic and revenue uncertainty.
Barnes cited the continued slow recovery nationally and regionally and uneven employment growth, as well as efforts to stem what he called a "historic" deferral of long-term liabilities.
"We're mixed, but we're cautiously optimistic," he said. "The out-year problems identified in the report are a huge improvement over the massive structural imbalances that were shown in the reports published in 2009 and 2010."
According to the report, Connecticut's long-term obligations total $64 billion, down slightly from last year's $66 billion. It includes $20 billion of bonded debt; $16 billion for state employees' OPEB, or other post-employment benefits; $13 billion for state employees' pensions; $11 billion for teachers' pensions; $3 billion for teachers' OPEB; $1.4 billion to cover a deficit from converting to generally accepted accounting principles, or GAAP budgeting, and $272 million for a budget reserve fund.
Connecticut has taken steps to shore up its state employee pension system, said Barnes, who nonetheless added: "The real concern is how we deal with long-term pension liability debt."
Converting to GAAP budgeting was a campaign promise of Democratic Gov. Dannel Malloy in 2010. Connecticut closed last month on $560 million of general obligation bonds to be amortized through 2028, which will cover half the GAAP deficit. According to Barnes, the state intends to fund the remainder in roughly $46 million increments from fiscal 2016 through 2028.
The state would also budget to cover any future shortfalls, according to Barnes.
"Ultimately, this will reduce our borrowing costs and give us more cash on hand for our general fund," he said.
Republicans, though, accuse Malloy's administration of playing election politics with the budget. The governor will run for his second term next year.
"For three years, Gov. Malloy has calculated state deficits using current services estimates. Now, as he approaches an election year, he has chosen a different accounting method in order to show a rosier picture. The problem is, even accounting can't cover up the governor's fiscal mess," said state Senate Republican leader John McKinney, R-Fairfield. "The governor has run out of gimmicks and shown no appetite to reduce state spending."