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Comptroller Releases 1996 "Watch List"of Potential Fiscal Problems

Contact: Bob King
860-703-3311 or 860-702-3300

In a report on Connecticut's fiscal and economic health released today, State Comptroller Nancy Wyman lists five items that may create a deficit as large as $437 million in the 1996-97 state fiscal year. Wyman said that as the state's fiscal guardian she will be monitoring the items on this "Watch List" carefully in the coming months.

The troublesome factors are:
* Federal funds cuts -- Ongoing negotiations in Washington show that the state will face drastic reductions in federal aid, especially for Medicaid, which may result in a $50 million shortfall for the 1996-97 fiscal year.
* Overly optimistic revenue projections -- The 1996-97 fiscal year projects growth of more than 5% in sales, income, and corporation taxes, while the state economy is now expected to grow at only 2% or less. Potential shortfall: $100 million.
* Privatization of the state lottery -- The effective borrowing of dollars to plug a budget hole is poor policy, Wyman said. A budget hole of $200 million could result if the sale as proposed isn't approved.
* Uncompensated care tax -- $67 million of taxes on hospitals which was supposed to help pay for this care was kept in the state's general fund, and some are calling for this amount of the tax to be totally or partially rescinded.
* Social service accounts -- During the current biennium, the state is providing $81 million annually in child care and transportation aid to welfare recipients participating the Job Connection Program. As welfare benefits are reduced, the demand for these services is likely to rise. The potential shortfall is estimated at $20 million.

The list is part of Wyman's first annual report to state residents on the economy and state budget. The report also examines demographic and social trends and looks at the problem of state residents without medical insurance.

In addition, Wyman notes that she is investigating the possibility of using the purchasing power of the state health care contract, under which 166,000 lives are insured and which her office administers, to leverage better rates for municipalities who must insure their own workers.

The comptroller also makes public a long-term care insurance initiative for state employees which has the potential to save future state Medicaid expenditures -- at no cost to taxpayers.

(Copies of the report are available by phoning the above numbers), or online at: http://vvv.osc.state.ct.us/public/reports/economic/96cmprpt/crpttitl.htm.

For Immediate Release
January 30, 1996

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