August 29, 1997
The Honorable John G. Rowland
Governor of the State of Connecticut
Hartford, Connecticut 06106
Dear Governor Rowland:
In accordance with Section 3-115 of the General Statutes and with my duty to render all public accounts under Article IV, Section 24, of the State Constitution, I am submitting my official report for the fiscal year ended June 30, 1997. This year-end report is subject to audit and certification by the Auditors of Public Accounts.
Under the state's current modified cash basis of accounting, the General Fund posted a net surplus of $262,638,956 for Fiscal Year 1997. Revenues exceeded expenditures by $382,100,907; however, this balance was reduced by a net carry forward of $110,973,741, which will be used to cover future state budget obligations, and miscellaneous adjustments totaling $8,488,201. The largest components of the carry forward are for debt service payments ($40 million) and payments associated with the early retirement program ($51.4 million). In accordance with Special Act 97-21, Section 59, this office has determined that $166,700,000 of the net surplus is available and will be reserved for payment of principal and interest on the Economic Recovery Notes over the current biennium, thereby retiring this debt. The remaining $95,938,956 of the surplus has been reserved for transfer to the Budget Reserve Fund which, with these additional monies, will total $336,909,422. This brings the Budget Reserve Fund to 3.6 percent of the current fiscal year's net General Fund appropriations, an amount that still leaves the fund 1.4 percent, or almost $131 million, short of the statutory target.
Total General Fund revenues increased by 5.2 percent between fiscal years 1996 and 1997, and budgeted expenditures increased at a 4 percent rate over this period. Total income tax receipts were up 8 percent over last year, which is especially noteworthy in light of the income tax reductions that became effective during the fiscal year. Overall spending growth was contained by a lower than anticipated rate of increase in Medicaid payments (2.4 percent), and declines in income support expenditures such as Aid to Families with Dependent Children (down 3.8 percent) and General Assistance (down 9 percent).
As detailed in the enclosed statements, realized revenue exceeded budgeted levels by $532.4 million. A strong national economy has led Connecticut to its best year of job growth and income performance since the recovery began in late 1992. Over the fiscal year just ended, the state added 28,800 jobs. To date, Connecticut has regained almost 60 percent of the jobs lost to recession. Strong financial markets and hourly wage growth of 2.6 percent increased total state income. State income tax receipts ended the year $261.9 million over budget and total tax refunds were $91.5 million under original budget projections owing to large capital gains that reduced or eliminated anticipated refunds. State spending ended the year $150.3 million over budget; however, the higher than anticipated expenditures were more than offset by the strong revenue receipts.
The Transportation Fund ended the year with a surplus of $114,620,950, an increase of $42,908,518 from the surplus carried forward from the prior year. The increase occurred through a combination of actual revenues exceeding budgeted projections along with expenditures falling below the budget plan.
The General Fund results contained in this report are based upon the modified cash basis of accounting used to formulate and execute the state budget, as currently required by state law. My office also publishes a Comprehensive Annual Financial Report prepared on a modified accrual basis as prescribed by Generally Accepted Accounting Principles (GAAP). The cumulative General Fund GAAP deficit as of June 30, 1997 is projected at $640 million.
The difference between the budgetary and GAAP basis projections is primarily due to the recognition under GAAP of projected liabilities, revenues, and other items which will be outstanding at year end and which are not reflected in the modified cash basis currently used for budgetary reporting. The recognition of these adjustments under GAAP results in a more accurate statement of the General Fund's financial position.
If you have any questions, I will be pleased to discuss this report at your convenience.
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