COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
DEPUTY COMPTROLLER
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| STATE OF CONNECTICUT | ||
| NANCY WYMAN COMPTROLLER |
OFFICE OF
THE STATE COMPTROLLER 55 ELM STREET HARTFORD, CONNECTICUT 06106-1775 |
MARK OJAKIAN DEPUTY COMPTROLLER |
May, 2007
To the Citizens of the State of Connecticut
It is our privilege to present this Comprehensive Annual Financial Report (CAFR) of the State of Connecticut for the fiscal year ended June 30, 2006. This report was prepared in its entirety by the Office of the State Comptroller. The Comptroller is responsible for state accounting practices and is committed to sound financial management and governmental accountability.
We believe that the financial statements are fairly presented in all material aspects. They are designed to set forth the financial position of the state, its operating results and the changes in net assets or fund balances of the major funds and non-major funds in the aggregate. All required disclosures have been included to assist the public, state policy makers, and the financial community in understanding the state's financial affairs.
The CAFR is designed to be in conformance with generally accepted accounting principles (GAAP) for governmental units as promulgated by the Governmental Accounting Standards Board as well as the reporting requirements prescribed by the Government Finance Officers Association. The Management's Discussion and Analysis (MDA) contains information that prior to 2002 was found within the letter of transmittal. In addition to the basic financial statements, the CAFR includes: combining financial statements that present information by fund category, certain narrative information that describes the individual fund categories, supporting schedules, and statistical tables.
The Fiscal Year 2006 CAFR was released two months late due to a related nine month delay in generating the 2005 CAFR. The late filing of the Fiscal Year 2005 CAFR, as fully detailed in last year's report, delayed the start of work on the Fiscal Year 2006 closing adjustments and financial statements.
PROFILE OF THE STATE OF CONNECTICUT
Connecticut became the fifth state of the United States on January 9, 1788. Its borders encompass 5,009 square miles. Within its compact borders, Connecticut has forested hills, urban skylines, shoreline beaches, and historic village greens. There are classic Ivy League schools, modern expressways, corporate offices, and small farms. Connecticut is a thriving center of business as well as a vacation location. It is both a New England State, and suburban to New York City. The population of Connecticut was 3,504,809 according to the July 1, 2006 U.S. Census estimates. Five large cities, Bridgeport, New Haven, Hartford (the State Capitol since 1875), Stamford and Waterbury, have populations in excess of 100,000 residents.
State Government in Connecticut has three branches: executive, legislative and judicial. Voters elect six state officers: Governor, Lieutenant Governor, Treasurer, Comptroller, Secretary of State and Attorney General. All have four-year terms. Connecticut also elects two U.S. Senators and five U.S. Representatives. Connecticut's General Assembly or legislature has a Senate and a House of Representatives.
The regular sessions of the General Assembly are held every year. These sessions run from January through June in odd-number years and from February through May in even-number years. The General Assembly reconvenes in special session to deal with emergencies or bills or appropriations vetoed by the Governor. Members of both houses represent districts based on population. There are currently 36 State Senators and 151 State Representatives. Members of the General Assembly are elected to two-year terms. The Judicial Department is composed of the Superior, Appellate and Supreme courts. Except for judges of the probate court, who are elected by the voters of the town or district that they serve, all judges are nominated by the Governor and appointed by the General Assembly.
Connecticut has no system of county government. Below the state level, governing units consist of 169 municipalities. The General Statutes of Connecticut provide procedures for the creation of many types of local special purpose authorities, districts and similar bodies. Under Connecticut law, all municipal governmental bodies have only the powers specifically granted to them by the state and the ancillary powers that are necessarily implied by the powers explicitly granted.
ECONOMIC CONDITION AND OUTLOOK
After almost eight years of solid economic growth, Connecticut began to experience payroll job losses in Fiscal Year 2001. In Fiscal Years 2001, 2002 and 2003 the state's payroll job losses totaled 13,800, 12,600 and 27,200 respectively. After three successive years of job losses, in Fiscal Year 2004, the state again experienced gains in payroll employment. In Fiscal Years 2004, 2005, and 2006 Connecticut added 7,000, 14,700, and 16,100 payroll jobs respectively.
Connecticut's payroll employment totaled 1,679,600 at the end on Fiscal
Year 2006. The Fiscal Year 2006 job gain represented a 1.0 percent rise in
employment as compared to a 1.8 percent job increase nationally during the
same period.
Over the past ten years, Connecticut has experienced a shift in the industrial make-up of its workers with manufacturing jobs being replaced by service sector jobs. This is a trend that began several decades ago. In the last ten years, manufacturing employment in Connecticut has declined by almost 30 percent while during the same period employment in professional and business services grew by 8.3 percent, financial services saw growth of 6 percent and the leisure and hospitality industry grew by over 14 percent. Despite these shifts, manufacturing continues to play an important role in Connecticut's economic life contributing one in every ten payroll jobs.
Connecticut's unemployment rate was 4.2 percent at the end of Fiscal Year 2006 compared to a national rate of 4.6 percent. During Fiscal Years 2006 Connecticut's labor force grew just over 1 percent. National labor force growth during the same period approached 2 percent.
Between 1997 and 2004 real Gross Domestic Product in Connecticut grew at a 2 percent rate ranking Connecticut 39th in the nation in growth. Between 2004 and 2005 Connecticut's real Gross Domestic Product grew 3.2 percent ranking it 24th in the nation.
Connecticut continues to be a national leader in income measurements. Connecticut's 2006 per capita income of $49,852 ranked it first in the nation. Between 2005and 2006 Connecticut's per capita income grew by 5.2 percent ranking it 22nd nationally in income growth. Connecticut is also a national leader in Median Family Income with a median for all families of $75,541. Just over 9 percent of Connecticut's residents lived at incomes below the poverty level.
MAJOR POLICY INITATIVES
Contracting Standards Board
The Contracting Standards Board was created by executive order in response
to concerns relating to the potential for abuses of existing state
contacting and procurement laws, regulations and practices. The Board, after
review of the existing contracting and procurement legal and regulatory
environment was required to draft and maintain a uniform procurement code
and to develop related training programs for state employees. A new office
with ten staff members was established to support the activities and
operations of this board. This new office was intended to add accountability
and transparency to the state's vendor selection process.
Increase Funding to Nursing Homes and other Private Social Service
Providers
The Fiscal Year 2006 budget contained over $100 million to provide for an
average annualized increase of 4 percent to nursing homes and other private
providers of specific state social services. These private providers
contract for the provision of services with the Department of Mental
Retardation, The Department of Children and Families, The Department of
Mental Health and Addiction Services, The Department of Corrections and the
Judicial Department as well as with some councils and boards. The additional
funding was contingent upon federal approval of a nursing home provider tax
program. The provider tax would assess a user fee on revenue generated by
nursing facilities based upon patient days. The funds raised from the tax
would generate federal reimbursements by increasing the Medicaid rates paid
to the nursing homes. All of the tax generated is effectively returned in
the aggregate to the nursing homes through an increase in their Medicaid
rate paid by the state and partially reimbursed by the federal government.
Restoring Subsidized Health Insurance for Certain Eligible Adults
Parents of children with family incomes between 100% and 150% of the federal
poverty level retained eligibility to participate in the state's HUSKY
health insurance program at a minimal cost. The parent's monthly premium
would be $25 with a $1 co-payment on outpatient medical services. The state
cost of this program was estimated at $39 million in Fiscal Year 2006 and
was anticipated to grow to over $50 million in Fiscal Year 2007.
This same initiative restored Medicaid presumptive eligibility for children
and implemented an expedited eligibility for pregnant women.
BUDGETARY AND OTHER CONTROL SYSTEMS
In November 1992, electors approved an amendment to the State Constitution providing that the amount of general budget expenditures authorized for any fiscal year shall not exceed the estimated amount of revenue for such fiscal year.
This amendment also provided a framework for placing a cap on budgeted appropriations. Annual budgeted appropriations are capped at a percentage increase that is based on either the five-year average annual growth in the state's personal income or inflation, whichever is higher. Debt service payments, certain statutory grants to distressed municipalities, and appropriations required by federal mandate or court order are excluded from the limits of the cap.
The spending cap can be lifted if the Governor declares the existence of extraordinary circumstances and the General Assembly by a three-fifths vote approves appropriations in excess of the cap. This has occurred in several fiscal years to allow direct appropriations of surplus to be substituted for debt financing, and other permit other spending initiatives from surplus funds.
Budget control is maintained at the individual appropriation account level by agency as established in authorized appropriation bills. The allotment process exercises control over obligations or commitments. The Governor, through his budget office, allots funds for both budgeted and non-budgeted accounts and funds. The Governor is permitted to modify appropriations through the allotment process under certain circumstances and within percentage limitations specified by the General Assembly.
Elected officials, agency commissioners, directors of public benefit corporations and agency managers are responsible for establishing internal control structures. Good internal control systems ensure that: resource use is consistent with laws, regulations and polices; resources are safeguarded against waste, loss and misuse; and reliable data are obtained, maintained and fairly disclosed in reports. The Office of the State Comptroller has worked to improve the overall internal control environment in state government. This work has included improvements to the central state accounting system that advance internal control efforts.
ACKNOWLEDGEMENTS
I wish to express my personal thanks to the many individuals in various agencies and reporting units whose cooperation and assistance have made this report possible. I would also like to thank my staff for their work in producing this report.
Sincerely,
Nancy Wyman
State Comptroller