State of Connecticut

Comptroller's Seal
STATE OF CONNECTICUT
  OFFICE OF THE STATE COMPTROLLER  
Kevin Lembo
State Comptroller
55 ELM STREET
HARTFORD, CONNECTICUT
06106-1775
Martha Carlson
Deputy Comptroller

LETTER OF TRANSMITTAL

December 31, 2011

The Honorable Dannel P. Malloy
Governor of the State of Connecticut
State Capitol
Hartford, Connecticut

Dear Governor Malloy:

I write to provide you with the General Fund and Transportation Fund financial statements for Fiscal Year 2011. These statements have been audited by the State Auditors of Public Accounts.

After all transfers and release of fund balance reserves, Fiscal Year 2011 ended with a General Fund surplus of $236,922,515. However, if prior year fund reserves had not been available for use in Fiscal Year 2011, the General Fund would have ended the year with a deficit of $212,946,074. In addition, in the absence of non-recurring revenue sources such as federal stimulus dollars and one-time transfers the General Fund deficit would have exceeded one billion dollars. With the exception of $14.5 million that is contractually obligated to the OPEB Trust Fund, Section 511 of PA 09-3 JSS requires reservation of the surplus balance for payment toward $915.8 million of 2009 Economic Recovery Notes. The Transportation Fund ended Fiscal Year 2011 with a fund balance of $107,365,132.

General Fund spending in Fiscal Year 2011 was up by more than $600 million or 3.7 percent over last fiscal year. General Fund grants to towns increased by less than 1 percent during the fiscal year. General Fund grants to other than towns, which include residential care payments, foster care services, homeless grants and health care services such as Medicaid, grew in excess of $400 million or 6.2 percent in Fiscal Year 2011. Personal Services such as wages and salaries rose by 1.2 percent over last fiscal year. All of the remaining components of General Fund spending increased by about 3 percent.

General Fund revenues were flat in Fiscal Year 2011 growing by 0.1 percent. The slow growth was primarily due to a reduction in one-time revenue sources. General Fund tax revenues in Fiscal Year 2011 were up a solid $1.5 billion or 10.6 percent. The personal income tax, the largest single tax category, expanded by over $660 million from the prior fiscal year due largely to strong financial markets. With the exception of the real estate conveyance tax, all major tax categories outperformed the prior year.

The national economy as measured by real GDP grew at a moderate rate of just over 2 percent during the first two quarters of Fiscal Year 2011 before slowing sharply in the second half of the fiscal year. Second half growth was about half of the first half level. This is consistent with Connecticut’s job performance, which expanded by 15,200 payroll jobs during Fiscal Year 2011 with most of the gain coming during the first six months of the fiscal year.

In Fiscal Year 2011, Connecticut weekly earnings increased at a 3.3 percent rate. The State’s personal income has been growing at a rate in excess of 4 percent.

The stock market realized double digit gains over the course of the fiscal year. The Dow increased by 25 percent as recessionary pressures eased. Historic growth was posted in corporate profits in calendar year 2010 with solid results continuing into the first quarter of 2011.

Retail sales were strong throughout Fiscal Year 2011 growing by more than 8 percent. The personal savings rate declined steadily during most of fiscal year. The higher store sales helped to boost Connecticut’s Fiscal Year 2011 sales tax revenues by 4.7% from a year ago.

The State’s housing sector continued to struggle in Fiscal Year 2011. New housing permits declined 5 percent from already depressed levels and existing home sales fell 19 percent during the fiscal year with quarterly sales at about half of the 2005 level.

After declining in 2009, Connecticut’s export sector rebounded with solid growth in 2010 continuing into 2011 with double digit growth.

The figures in this report are presented on the budgetary basis of accounting and are formulated in accordance with legislative requirements. The report is not intended to provide a comprehensive picture of state finance but is rather a presentation of legal activity within the funds. A separate report is produced by my office for purposes of full financial disclosure in accordance with generally accepted accounting standards. That report is entitled the Comprehensive Annual Financial Report and is available in February.

Sincerely,

Kevin Lembo
State Comptroller