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Connecticut’s Crisis

Connecticut’s Crisis.

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Connecticut’s Crisis

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  1. Connecticut’s Crisis

  2. GASB – policy setting org that sets GAAP for state & local govtJune 2012 – GASB imposed reforms to take effect in 2014. Require all pension and OPEBs to be reported fully on F/S. Estimated T’s of unreported liabilities.How will States handle this? How will Towns handle this?

  3. Moody’s

  4. Accounting PrinciplesCore – Matching Concept

  5. C = comprehensive A = annualF = financialR = reports Where is the data? CAFR’s

  6. Full Accrual=Long-Term Health Modified Accrual=Short-Term Health Either of the above are GAAP Budget Basis can be anything! “Modified Cash” for the State

  7. Budget Reporting Basis – not GAAP • Revenue – as earned and available • Expense – as paid • Debt - income (reporting revenue as fast as possible reporting expense as slow as possible)

  8. State of CT - Balance Sheet Working Capital MethodModified Accrual

  9. State of CT – Balance SheetFull Accrual – Almost…….Sort of…….

  10. Pension & OPEB Obligations Being “amortized” onto the books starting in 08 On these 6/30/12 statements only 5/30th included That means 25/30th are not included 83% of this debt - NOT on the books

  11. State of Connecticut Balance Sheet – Long-term

  12. State of Connecticut Balance Sheet – Long-term – Continued

  13. Lessons from Detroit…..

  14. Lessons from Detroit…..At .16 $30,000 pension $ 4,800

  15. Revenue has not grown as fast as commitments • State employee benefits increased significantly, with little contribution to funding • Unfunded pensions – close only to MA • OPEBs – highest in country • CT & RI only 2 states with no county gov’t • Inefficiencies in running 169 towns, 195 school districts?

  16. CT problems – exacerbated by reliance of fed funding (37% of our revenue) • 32% economy on FIRE (nat’l average is 21%) • Less people employed than in 1990 • Not recovering as quickly as expected/hoped • 5,000 fewer small business than in previous decade

  17. Co’s downsizing/leaving CT • Loosing highly educated workforce • Major investments in higher education – students move to other states • Tax incentives do not constitute an economic strategy • Our reputation is unfriendly to business • High taxes, over regulated

  18. Healthcare costs rising • Population – shrinking

  19. Many One-Time Fixes to Balance the Budget

  20. What lies ahead? $1B 1 year deficit awaits the “winner” 2015-2016 tax increases?drastic cuts in spending?more borrowing?

  21. As services are cut………. As taxes increase……….What happens to our population?

  22. $875 M $560 M * $314 M refi*GAAP Conversion Bonds

  23. A small sampling of idea’s from the CPAs….

  24. What do we do now? • Address the problem – report truthfully& completely • Improve economic growth • Improve infrastructure (roads, bridges, mass transit) • Update, coordinate, rationalize regulations • Tax code reforms to encourage small business and private sector growth • Strengthen education-workforce pipeline

  25. Enhance CT competitiveness • Create transparency, accountability, efficiency and transformation at all levels of gov’t • Insist on 5 and 10 yr strategic plans • Promote dialog for non-partisan solutions

  26. Thank you! Camille Murphy, CPA 203-208-0572 camille@bmsctcpa.com

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