Connecticut Gov. Dannel Malloy called for universal pre-kindergarten and other educational initiatives in his State of the State and
The educational push in the $19 billion spending plan, up 2.7%, joins Malloy's proposal, announced last week, to use a $500 million surplus to bolster the state's rainy day fund, pay an additional $100 million toward the state's pension fund and issue a $55 sales- and gas-tax refund to all residents.
The $250 million rainy day, or stabilization, deposit would boost the fund to $520 million. The pension-fund payment, he said, would generate $430 million over 20 years based on an 8% rate of return. The refund, according to Malloy, would pump $155 million into Connecticut's economy and local businesses.
"I don't believe in short-term fixes, and this should not be a one-time approach. A bill I submit to you today would ensure this framework is required for any future budget surpluses," Malloy, a Democrat, told a joint opening-day session of the legislature in Hartford.
Wednesday's storm pushed the speech back one day.
In 2009, after the financial markets imploded, Connecticut borrowed $1 billion for operating expenses and depleted its $1.4 billion rainy-day fund. It since has replenished it with $270 million. Malloy said Thursday that the state should split any additional surpluses in the coming months between the rainy day fund and long-term debt reduction.
Moody's Investors Service, which rates Connecticut's general obligation bonds Aa3, warns of pension-funding ratios that are among the lowest in the United States "and likely to remain below average."
According to a Moody's report that preceded the state's $575 million sale of GAAP conversion bonds in October, the state's reported funded ratio for its employee retirement system dropped to 42% as of June 30, 2012.
Moody's adjusted funded ratio as of June 30, 2011, is 31.1%, the rating company said.
Connecticut issued the debt to cover deficits related to its conversion to GAAP, or generally accepted accounting principles, budgeting.
Standard & Poor's, Fitch Ratings and Kroll Bond Rating Agency all rate Connecticut's GO bonds AA.
State Treasurer Denise Nappier called the pension payment "a commendable step toward reducing our long term liabilities." She also urged dedication of any additional surplus realized during the fiscal year to bolster the fund balance, which she called "a key factor in determining the state's credit worthiness."
Leaders of the legislature's Republican minority were skeptical.
"Connecticut faces a $2 billion deficit in [fiscal] '15 and '16. It is irresponsible for the governor to continue talking about this year's so-called surplus as if those deficits do not exist,' said Senate Minority Leader John McKinney, R-Fairfield. "They do, and we need to deal with them in this legislative session by reducing the size and cost of government."
McKinney, who said the state's bonded debt has spiked $1.1 billion under Malloy's watch, called paying down debt, especially pension liability, a top priority.
Pre-K was among five educational initiatives Malloy introduced Thursday. He wants to raise the number of children served early education by 40%, to 4,000 by 2018, saying $13.8 million is necessary for fiscal 2015 to begin a phase-in.
Malloy also proposed $135 million to bring Connecticut's state community colleges and university campuses into a single "student-centered, technology-enriched" system. Malloy called for a $60 million transfer from the general fund to the state college system and a further $60 million for its capital projects.
In addition, he proposes a new program that offer parents up to $250 into a tax-free college savings account for children.
