State of Connecticut

The Comptroller's Report:
Connecticut's Economic Health
 seal of the office of the State Comptroller
February 2002 Nancy Wyman, State Comptroller
 
Dear
Fellow
Citizens,

As the state's chief fiscal guardian and an independent voice for taxpayers, I am proud to present this unique issue of The Comptroller's Report: Connecticut's Economic Health.
Nancy Wyman, State Comptroller
Nancy Wyman, State Comptroller

 

This annual report is designed to give you a common sense view of our state's fiscal condition and outlook for the future. It can also help citizens hold government accountable by showing them where their hard earned tax dollars are being spent.

By Constitutional authority, the Comptroller is the state's accountant and payroll officer. I also procure and administer the health care plan for all state employees, retirees and their dependents. Therefore, I am constantly looking for ways to make government spending more efficient, and to improve the quality and cost of health care for all residents.

Like many of you, I am a member of the so-called "sandwich generation." I know well the pressures many of us experience caring for our children, grandchildren and aging parents - all at the same time. That is why it is so important to me that Connecticut continues to invest in our future. In particular, home care, day care and long-term health care services must be enhanced. I believe these programs not only improve peoples' lives, but can save tax dollars.

Government also must continue to explore ways to rein in the soaring costs of prescription drugs. We should find ways to use the state's enormous buying power to drive down the price and increase the accessibility of medications to the consumer.

Helping small businesses thrive has been a priority for me since I was first elected seven years ago. This year, I plan to ask the General Assembly to allow small businesses to buy into the state's Municipal Employees Health Insurance Program. That initiative could help businesses offer vital health insurance benefits to their workers, at no cost to taxpayers.

In this time of rapid economic change, efficiency is paramount. Government, like its citizens, must do more with less. Trying to save money by blindly cutting programs that work, however, makes no sense. A more practical approach is to figure out what programs are not delivering and make targeted, cost-effective cuts.

The tools to make those kinds of decisions will be put into policymakers' hands through the ongoing revamping of our state's core financial computer systems. This enormous, collaborative project, known as CORE-CT, represents a radical change in the way the state does business. Most importantly, it will for the first time enable the state to track every tax dollar that is spent so that intelligent budget cuts can be made without damaging effective programs.

The state also must become a better business partner to the towns and cities of Connecticut. We can take a step toward that goal by increasing the savings in our emergency Rainy Day Fund so that we are able to deal with inevitable economic downturns that affect every municipality. As I proposed last year, the state should also reinvest the interest earned on the Rainy Day Fund by sharing it with the towns and cities in order to help them avoid local tax increases.

Finally, I will continue to fight for the state to adopt Generally Accepted Accounting Principles. This accounting and reporting method presents a much more honest picture of state finances than the current practice, which allows for distortion and manipulation of the state's receipts and expenditures.

I am hopeful that you will find this report informative and that it encourages you to participate in the democratic process that affects every citizen of Connecticut.

Sincerely,

Nancy Wyman
State Comptroller

P.S. - If you would like to receive updated information on Connecticut's economy throughout the year, be sure to sign up for our E-mail updates at http://www.osc.ct.gov/public/listserv/ or visit my website at www.osc.ct.gov

Connecticut's Workers Among Most Productive in Nation

Diverse, Well-Educated Workforce Poises State for Economic Recovery

With one of the most productive and diverse workforces in the nation, Connecticut is well positioned to resume a course of economic expansion.

According to the Connecticut Department of Labor, worker productivity in the state is 23 percent above the national average. The state's workforce is highly educated and well trained. Connecticut ranks third nationally in the percent of population over age 25 who hold a bachelors degree or higher.

This robust level of productivity and advanced education results in high wages. Connecticut ranks first in the nation in average annual pay, with an average salary of over $45,000.

The state's industrial base with its 93,000 business establishments has diversified over the last decade. While defense and insurance continue to be important industries, the state's economic development is increasingly tied to industries such as bioscience, software development, pharmaceuticals, communications and medical technology. 

A federal Department of Labor survey put the number of high-tech workers in the state at 77,500 in 2000, up 23 percent from 1994. Connecticut ranks fifth among all states in the percentage of workers employed in technology occupations.

Connecticut also benefits economically from its geography, especially its location between the financial centers of Boston and New York. More than one quarter of the total population of the United States and 60 percent of the Canadian population lives within 500 miles of Connecticut. Over 30 percent of the nation's effective buying income, retail sales, and manufacturing firms are within a day's drive of the state.

Connecticut has an extensive network of expressways and arterial highways providing access to regional markets. In 2001 the state legislature made a major financial commitment to reducing congestion on the state's roads and highways. Bradley International Airport is strategically situated for overseas airfreight operations and has been continually upgraded to keep pace with service needs.

Connecticut provides financial assistance to all urban and rural bus services operating in the state. Railroad freight service is provided to most major towns and cities in the state, and connections are provided with major eastern railroads and Canadian markets. Rail commuter service operates between New Haven and New York City and connecting points, as well as between New London and New Haven. The state's harbors at Bridgeport, New Haven and New London can accommodate deep draft vessels.

Still, Connecticut's economy moves in the same general cycles as the national economy. At times, the state is ahead of national economic trends, at times we lag behind. As of this writing, Connecticut and the nation were moving through a period of economic recession.

According to preliminary estimates by the Bureau of Economic Analysis, Real Gross Domestic Product (GDP), which measures the output of goods and services produced in the United States, declined in the third quarter of 2001. This comes after virtually no growth in GDP in the second quarter. Over the last five years, real GDP had expanded at an average annual rate of just over 4 percent.

The National Bureau of Economic Research (NBER), a nonprofit, nonpartisan research organization that studies peaks and troughs in the business cycle, declared in November 2001 that the country had entered into recession in March 2001. This marked the end of a historic ten-year period of economic expansion. On a positive note, the NBER stated: "Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades."

The information that follows in this section examines Connecticut's economic life: where we work, what we earn, and how we spend our income. It shows a fundamentally prosperous economy that is struggling through a current period of recession but is poised to resume its historic pattern of strong growth.

Employment

 

Table of Non-Farm Job Gain/Loss and percent Change Totals for Connecticut and the United States. Click here for a text representation of this table.

Bar Graph of Unemployment Rates for Connecticut and the United States. 
Click here for a text representation of this table.

Connecticut's Employment Distribution by Industry. Click here for a text description of this chart.

Income

Per Capita Personal Income 
for Connecticut and the United States 
and
Connecticut's Comparative Advantage
Year Connecticut United States % Above The
United States
1995 $31,423 $23,272 35.0%
1996 $32,814 $24,286 35.1%
1997 $34,803 $25,427 36.9%
1998 $37,190 $26,909 38.2%
1999 $38,506 $27,859 38.2%
2000 $40,870 $29,451 38.8%
SOURCE: Bureau of Economic Analysis, 10/19/01 release

 

Personal Income Growth for Connecticut and the United States. Click here for a text description of this chart.

 

 
Real (inflation adjusted) Median Household Income and Growth Rate for Connecticut and the United States. Click here for a text representation of this table.

 

Other Economic Measures

   Retail Trade In Connecticut by Industry and Fiscal Year. Click here for a text representation of this table.

Connecticut's Financial Position:
From Deficit to Surplus and Back Again

Connecticut state government uses two different accounting methods to assess and report its fiscal condition. One method is referred to as Generally Accepted Accounting Principles (GAAP); the other is known as modified cash accounting. GAAP, as the name implies, is the recognized standard for accurate financial reporting. Corporate financial reports that many readers are familiar with are based on GAAP.

Connecticut state government has not yet adopted GAAP for budget or financial control purposes. Instead the state uses the modified cash system to prepare the budget and to control and report spending and receipts through the year.

The state's fiscal condition under modified cash accounting is dependent on relatively unsystematic timing of payments and posting of receipts. GAAP utilizes more rigid standards on when to post expenditures and record revenue. Therefore, GAAP provides a more consistent and reliable method for reporting and analyzing state financial data. Accordingly, the fiscal data that follows is presented on a GAAP basis.

Because the state budget is presently based on modified cash accounting, the media tends to report the state's position on this cash basis. Therefore, the GAAP numbers that follow may surprise some readers.

Fiscal Year 2001 General Fund Performance - 

Operating Results for One State Fund in a Single Fiscal Year (July 1, 2000 - June 30, 2001)

Bar chart of general fund operating surplus/deficit. Click here for a text description of this chart.

General Fund Revenues:

General fund tax revenue by source, fiscal year 2001.  Click here for a text description of this chart.

General Fund Revenues from fiscal year 1996 through 2001. Click here for a text representation of this table.

General Fund Expenditures:

General Fund Spending by Source, Fiscal Year 2001. Click here for a text representaion of this chart.

Beyond The General Fund - Total Governmental Operations

The state undertakes various activities that do not appear in the General Fund. These activities include transportation and housing programs, grants to municipalities for school construction and other needs, loan programs and other services. When these activities are combined with those of the General Fund, a more complete picture of state governmental operations emerges.

Total Government Operating Results. Click here for a text representaion of this chart.

Cumulative Financial Position of the State -The Balance Sheet

In evaluating the state's fiscal health, there is a tendency to focus exclusively on a single year of state operations. This approach fails to provide a long-term view of the state's financial position. The balance sheet provides this perspective. The balance sheet shows total state assets, liabilities, and fund balances at the close of each fiscal year.

Cumulative General Fund GAAP Deficit. Click here for a text representaion of this chart.

Debt Position

Net Outstanding State Debt. Click here for a text representaion of this chart.

Debt Issuance.Click here for a text representaion of this chart.

Trends in Long-Term Debt. Click here for a text representaion of this table.

Population Trends

Connecticut's Population by age group. Click here for a text representation of this chart.

Connecticut and U.S. Median Age. Click here for a text representation of this chart.

 

Connecticut Racial/Ethnic Chart - 1990 and 2000. Click here for a text representation of this table

Health Coverage:
Economic Downturn May Erode Recent Health Coverage Gains

In the past several years Connecticut has experienced a decline in the percentage of residents who lack health insurance. This trend has largely been due to a strong state economy and low levels of unemployment. Until recently, Connecticut's tight labor market encouraged more employers to offer health benefits to help attract and retain qualified workers.

comparison of non-elderly uninsured.Click here for a text representation of this chart.

Comparison of Non-Elderly uninsured in the New England States (2000). Click here for a text representation of this chart.

Comparison of Health Insurance Coverage Sources for the Non-Elderly Population (2000). Click here for a text representation of this chart.

Health policy analysts are predicting a rise in the uninsured population in the near term, based primarily on the convergence of two trends. The first is the weakening economy, both on the state and national levels. The current recession has produced a significant increase in the jobless rate. Studies of past recessions have shown that the loss of a job often means losing health coverage.

The second trend is rising health care costs. Medical inflation has been increasing sharply in recent years after a period of relative stability in the mid 1990s. As health benefits get more expensive, employers tend to shift more of the cost onto employees and some may stop offering coverage altogether. For their part, workers - especially low wage earners - are less likely to accept offers of coverage when costs rise because they cannot afford the employee portion of the insurance premium.

A recent survey by the human resource consulting firm William M. Mercer indicates that health benefit costs continued to increase for employers in 2001 and show no sign of slowing. More than 2,800 employers participated in the firm's nationwide survey and the following are among the findings:

Despite the recent decline in Connecticut's uninsured population, many state residents still lack health coverage and the vast majority are from working families. In addition, the downturn in the economy and rising health costs will likely erode health coverage levels in the near future.