State of Connecticut


The following discussion and analysis is supplementary information required by the Governmental Accounting Standards Board (GASB), and is intended to provide an easily readable explanation of the information provided in the attached basic financial statements. It is by necessity highly summarized, and in order to gain a thorough understanding of the state's financial position, the financial statements and footnotes should be viewed in their entirety.



Assets of the state's governmental activities were $5.3 billion less than liabilities, a deterioration in financial position of $0.7 billion related to current year operations. Assets of the state's business type activities exceeded liabilities by $3.9 billion, an increase of $0.1 billion related to current year operations. In total, net assets went from negative $0.8 billion to a negative $1.4 billion, a decrease in total net assets of $0.6 billion.

As noted above, the liabilities of the state exceeded its assets by $5.3 billion as of June 30, 2003. Of this amount, the unrestricted net asset portion was a negative $9.2 billion. One reason for the negative balance is the state's reliance on issuing bonds to fund certain operating grants. General Obligation bonds outstanding as of June 30, 2003 that related to municipal school construction, and other operating grants and loans totaled $3.3 billion. Additionally, long-term obligations such as net pension, compensated absences, and worker's compensation obligations of $3.9 billion, with no offsetting assets, further contributed to the state's negative financial position.

Fund Level:

Governmental fund assets exceeded liabilities resulting in a fund balance of $1.5 billion, of which $1.6 billion was reserved leaving a negative unreserved balance of $0.1 billion. The unreserved undesignated fund balance of the General Fund was also negative at $0.8 billion at June 30, 2003.

Enterprise Fund assets exceeded liabilities resulting in total net assets of $3.9 billion, of which $3.8 billion was restricted or invested in capital assets, and the balance of $0.1 billion was unrestricted.

Debt Issued and Outstanding:

Long-term bonded debt of governmental activities totaled $12.5 billion (see Note 16). In addition, $0.2 billion in Economic Recovery Notes was outstanding on June 30, 2003. Other long-term liabilities totaled $3.9 billion.


There are three major parts to the basic financial statements: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements.

GOVERNMENT-WIDE STATEMENTS (Reporting the State as a Whole)

Governments have traditionally focused their reporting on groupings of funds rather than on the government taken as a whole. The GASB 34 financial reporting model, upon which this report is based, retains this traditional focus on funds and adds an additional focus on the overall government's financial position and operations.

The Statement of Net Assets and the Statement of Activities are two financial statements that report information about the state as a whole and its activities. These statements help to demonstrate how the state's financial position as a whole changed due to the year's operating activities. These statements include all non-fiduciary assets and liabilities using the accrual basis of accounting.

The Statement of Net Assets presents all of the state's assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets measure whether the state's financial position is improving or not.

The Statement of Activities presents information showing how the state's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occur, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that will result in future fiscal year cash flows (e.g., earned but unused vacation time).

Both statements report three activities:

Financial reporting for governmental activities traditionally has focused on changes in current spendable resources rather than on changes in total resources. This traditional focus has been retained for purposes of fund reporting. However, as governmental activities are included with other activities in the government-wide financial statement format, the focus for these activities shifts to changes in total resources. In other words, all activities reported in government-wide financial statements are reported in a manner similar to private-sector accounting. To increase the readers understanding, a summary reconciliation of the difference between the governmental fund financial statements and the government-wide financial statements is provided as part of the basic financial statements (page 37).


Fund financial statements focus on individual parts of the state's operations in more detail than the government-wide statements. Funds are accounting devices that governments use to keep track of specific sources of funding and spending for particular purposes. The state of Connecticut is required to report four categories of fund statements -governmental, proprietary, and fiduciary funds, to the extent that state activities meet the criteria for using these funds, and "combining statements" for its component units.

As a practical matter, governments have traditionally been combining similar individual funds into groupings or "fund types" (i.e., general fund, special revenue funds, debt service funds, capital projects funds, enterprise funds, internal service funds and trust & agency funds). In the past, it was these fund types, rather than individual funds, that have been the focus of the combined financial statements presented in financial reports. Under the GASB 34 financial reporting model, as presented here, governments focus on major individual funds rather than on fund types (with aggregated information presented for the total of all non-major funds).

Major Governmental Fund Financial Statements:

Governmental fund reporting focuses primarily on the sources uses and balances of current financial resources and often has a budgetary orientation. The state's major government funds include the General Fund, the Transportation Fund and the Debt Service Fund.

General Fund. The General Fund functions as the chief operating fund for the state government. All of the state's activities are reported in the General Fund unless there is a compelling reason to report them elsewhere.

Transportation Fund. The Transportation Fund is a special revenue fund that accounts for motor vehicle taxes, receipts and transportation related federal revenues collected for the purpose of payment of debt service requirements and for making appropriations budgeted for the Department of Transportation and the Department of Motor Vehicles and related expenses. The Department of Transportation is responsible for all aspects of the planning, development, maintenance and improvement of the state transportation system.

Debt Service Fund. The Debt Service Fund is a governmental fund, which accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest.

Changes in budgetary reporting. Traditionally, governments have included a budget-to-actual comparison as one of their basic financial statements. The final amended budget has provided the budgetary amounts used for this presentation. The GASB 34 financial reporting model brought three important changes to traditional practice.

Major Proprietary Fund Financial Statements:

Proprietary funds (enterprise and internal service) are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting where all assets and liabilities are reported on the balance sheet. Revenues are recorded when earned and expenses are recorded when incurred. In accordance with the requirements of the GASB 34 reporting model utilized in preparation of this report:

Enterprise funds report activities that provide goods or services to the general public. An example is the Connecticut Lottery. Internal service funds report activities that provide supplies and services to the state's other programs and activities. An example is the state's motor fleet operations. Internal service funds are reported as governmental activities on the government-wide statements.

Fiduciary Fund Financial Statements:

The fiduciary fund category includes pension (and other employee benefit) trust funds, investment trust fund, private-purpose trust fund and agency funds. These fund types should be used to report resources held and administered by the state when it is acting in a fiduciary capacity for individuals, private organizations or other governments. Some of the important changes to traditional reporting include the following:

Limitation on the use of fiduciary funds. The use of fiduciary funds has been limited to accounting for resources that are not available to support a government's operations and programs. This limitation resulted in the non-fiduciary reclassification of numerous expendable and non-expendable trust funds reported in the Comprehensive Annual Financial Report prior to Fiscal Year 2002.

Changes in fiduciary funds. The distinction between expendable and non-expendable trust funds has been eliminated. Instead, some expendable trust funds have been reclassified and are now reported as special revenue funds while others have been replaced by the "private-purpose" trust fund. This fund type is used to report all trust arrangements under which principal and income are to be used to benefit individuals, private organizations or other governments. Non-expendable or endowment-like arrangements available to support the operations or programs of the government (e.g., cemetery perpetual care funds) are accounted for in a governmental fund type, newly created by GASB statement 34, called "permanent funds."

Component Unit Combining Statements:

The same GASB 34 reporting rules regarding the determination of major funds are applied to the states component units. The Component units of the State of Connecticut are:

Connecticut Housing Finance Authority. Classified as the State's major component unit, the CHFA is a public instrumentality and political subdivision created for the purpose of increasing the housing supply and encouraging and assisting in the purchase, development and construction of housing for low and moderate income families.

Connecticut Development Authority. CDA's purpose is to stimulate commercial development.

Connecticut Resources Recovery Authority. CRRA's purpose is solid waste management.

Connecticut Higher Education Supplemental Loan Authority. CHESLA's purpose is to provide resources for student loans.

Connecticut Health and Educational Facilities Authority. CHEFA's purpose is to provide resources for financing major projects for health and educational institutions.

Connecticut Innovations, Incorporated. CI's purpose is to stimulate application of new technology.

Capital City Economic Development Authority. CCEDA's purpose is to stimulate economic development in the city of Hartford.


Notes To The Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and the fund financial statements.

Required supplementary information. The RSI provides additional information regarding the States progress on funding its obligation to provide pension benefits to its employees.

Combining Financial Statements. Combining statements for non-major funds are not required to be presented or audited under generally accepted accounting principals. Nevertheless, Connecticut presents these statements as supplementary information, in the optional part of this report.



The following table was derived from the government-wide Statement of Net Assets. The state's combined net assets declined $0.6 billion over the course of Fiscal Year 2003 operations. The net assets of governmental activities decreased $0.7 billion, while net assets from business-type activities increased $0.1 billion.

State Of Connecticut's Net Assets
(in Millions)

Total Primary
Governmental Activities Business-type Activities Government
2003 2002 2003 2002 2003 2002
Current and Other Assets $ 3,114.3 $ 3,373.4 $ 3,767.3 $ 3,940.4 $ 6,881.6 $ 7,313.8
Capital Assets 9,531.9 9,125.8 2,627.6 2,306.1 12,159.5 11,431.9
Total Assets 12,646.2 12,499.2 6,394.9 6,246.5 19,041.1 18,745.7
Current Liabilities 2,344.8 2,535.4 555.4 488.4 2,900.2 3,023.8
Long-term Liabilities 15,648.4 14,568.4 1,964.4 1,948.7 17,612.8 16,517.1
Total Liabilities 17,993.2 17,103.8 2,519.8 2,437.1 20,513.0 19,540.9
Invested in Capital Assets,
Net of Related Debt 2,622.4 2,348.4 2,092.6 1,847.5 4,715.0 4,195.9
Restricted 1,233.9 1,244.2 1,650.1 1,855.5 2,884.0 3,099.7
Unrestricted (9,203.3) (8,197.2) 132.4 106.4 (9,070.9) (8,090.8)
Total Net Assets $ (5,347.0) $ (4,604.6) $ 3,875.1 $ 3,809.4 $ (1,471.9) $ (795.2)

The following condensed financial information was derived from the government-wide Statement of Activities and reflects the nature of the state's change in net assets throughout Fiscal Year 2003.

State of Connecticut's Changes in Net Assets
(Expressed in Millions)

Governmental Activities Business-Type Activities Total
2003 2002 2003 2002 2003 2002
Program Revenues
Charges for Services 1,072.9 $ 941.9 $ 2,594.8 $ 2,409.7 $ 3,667.7 $ 3,351.6
Operating Grants and Contributions 3,489.2 3,320.1 456.2 447.7 3,945.5 3,767.8
Capital Grants and Contributions 562.6 509.1 10.2 37.8 572.8 546.9
General Revenues
Taxes 8,644.7 8,292.6 - - 8,644.7 8,292.6
Casino Gaming Payments 387.3 369.0 - - 387.3 369.0
Other 208.5 229.5 111.3 98.8 319.8 328.3
Total Revenues 14,365.2 13,662.2 3,172.5 2,994.0 17,537.8 16,656.2
Legislative 80.2 80.2 - - 80.2 80.2
General Government 1,145.6 1,340.0 - - 1,145.6 1,340.0
Regulation and Protection 574.7 627.4 - - 574.7 627.4
Conservation and Development 410.2 434.4 - - 410.2 434.4
Health and Hospitals 1,711.1 1,664.1 - - 1,711.1 1,664.1
Transportation 941.3 1,366.1 - - 941.3 1,366.1
Human Services 4,138.9 3,882.7 - - 4,138.9 3,882.7
Education, Libraries and Museums 3,090.6 3,000.3 - - 3,090.6 3,000.3
Corrections 1,450.4 1,355.1 - - 1,450.4 1,355.1
Judicial 555.8 538.4 - - 555.8 538.4
Interest and Fiscal Charges 595.9 584.1 - - 595.9 584.1
Higher Education - - 1,977.9 1,869.9 1,977.9 1,869.9
Bradley International Airport - - 54.3 50.4 54.3 50.4
CT Lottery Corporation - - 643.2 672.1 643.2 672.1
Employment Security - - 963.2 736.3 963.2 736.3
Second Injury & Compensation Assurance - - - 61.2 - 61.2
Clean Water - - 29.4 30.9 29.4 30.9
Other - - 72.6 19.2 72.6 19.2
Total Expenses 14,694.7 14,872.8 3,740.7 3,440.0 18,435.4 18,312.8
Excess (Deficiency) Before Transfers
and Special Items (329.5) (1,210.6) (568.2) (446.0) (897.6) (1,656.6)
Transfers (640.2) (657.0) 640.3 657.0 0.1 -
Special Items 227.3 - (6.5) (4.5) 220.8 (4.5)
Increase (Decrease) in Net Assets (742.4) (1,867.6) 65.6 206.5 (676.8) (1,661.1)
Net Assets (Deficit) - Beginning (Restated) (4,604.6) (2,737.0) 3,809.4 3,602.9 (795.1) 865.9
Net Assets (Deficit) - Ending (5,347.0) $ (4,604.6) $ 3,875.1 $ 3,809.4 (1,471.9) $ (795.2)


The following charts depict the distribution of revenues and expenses for Fiscal Year 2003.

Revenues - Governmental Activities Fiscal Year 2003 - click here for text description

Expenses Governmental Activities Fiscal Year 2003 - click here for text description

Expenses and Program Revenues - Governmental Activities Fiscal Year 2003 - click here for text description


Within governmental activities, Fiscal Year 2003 program revenue receipts were $9.5 billion less than expenses. General revenues supplemented the programmatic revenue shortfall. General revenues in governmental activities amounted to $9.4 billion in Fiscal Year 2003. During Fiscal Year 2003, budget projections indicated that a gap between revenues and expenses had developed in the General Fund and would accelerate. In an effort to improve the state's future operating results, revenue enhancements were enacted and appropriations reduced during the course of Fiscal Year 2003 as discussed in the General Fund section of this MDA that follows.

Business-type activities saw an increase of $0.1 billion or 1.8 percent through Fiscal Year 2003 operations. Higher-Education expenses accounted for 52.9 percent of business-type expenses and 39.1 percent of program revenues. Program revenues exceeded expenses in the Connecticut Lottery Corporation by $0.2 billion.


The state completed Fiscal Year 2003 with a balance of $1.5 billion in its governmental funds. There is a small shortfall or negative balance of $0.1 billion in the unreserved portion of this fund balance. Fiscal Year 2003 operations had only a minor impact on the fund balance in governmental funds increasing the balance by $30.5 million.

General Fund

The General Fund is the chief operating fund of the state. At the end of Fiscal Year 2003, the General Fund had a negative fund balance of $0.4 billion of which $0.8 billion was unreserved. Fiscal Year 2003 operations increased the fund balance in the General Fund by $33.2 million. Tax increases and other revenue enhancements enacted by the legislature during Fiscal Year 2003 (Public Act 03-2) generated an estimated $485 million in additional revenue, and spending reductions introduced during the fiscal year were projected to save over $100 million (the estimates are on a budgetary basis or modified cash basis of accounting). These actions helped avert a large General Fund operating deficit in Fiscal Year 2003.

By the end of the first quarter of Fiscal Year 2003, budget based forecasts were showing a large deficit building for the year. In response, deficit mitigation legislation was enacted as referenced above. Specific tax changes included: an increase in the top personal income tax rate from 4.5 percent to 5 percent, a 20 percent surtax on corporate earnings, elimination of various sales tax exemptions and a 40 cent increase in the cigarette tax. The legislation also included an additional $72 million in one-time transfers to the General Fund to supplement the $284.1 million that had already been budgeted for such transfers in Fiscal Year 2003. Spending reductions included layoffs, an early retirement program, and various directed programmatic reductions.

Transportation Fund

The Transportation Fund ended Fiscal Year 2003 with a fund balance of $0.2 billion of which $0.1 billion was unreserved. Fund balance was reduced by $61.6 million through Fiscal Year 2003 operations. The majority of this reduction was due to the transfer of $52 million to the General Fund in accordance with Public Act 03-2.

Other Funds

The other funds category includes the state's special revenue funds. These funds had a balance of $1.1 billion on June 30, 2003 of which $0.7 billion was unreserved.

In Fiscal Year 2003, expenditures exceeded revenues by $1.2 billion in the other funds category. Bonds issued in the amount of $1.6 billion provided an offset to this deficit. The state has a long history of utilizing bond proceeds to offset operating deficits within these funds.


Capital Assets.

The State of Connecticut's investment in capital assets for its governmental and business-type activities as of June 30, 2003 amounts to $12.2 billion (net of accumulated depreciation). The increase in capital assets for governmental activities was 4.5% while the increase for business-type activities was 13.9%. Depreciation charges for the fiscal year totaled $0.7 billion.

State of Connecticut's Capital Assets
(Net of Depreciation, in Millions)

Governmental Business-type Total
Activities Activities Primary Government
2003 2002 2003 2002 2003 2002
Land $ 911.8 $ 863.6 $ 44.8 $ 46.1 $ 956.6 $ 909.7
Buildings 879.9 701.4 1,712.0 1,311.6 2,591.9 2,013.0
Improvements Other than Buildings 63.2 45.4 230.0 198.8 293.2 244.2
Equipment 458.4 547.4 355.7 365.4 814.1 912.8
Infrastructure 5,481.8 5,719.7 - - 5,481.8 5,719.7
Construction in Progress 1,736.9 1,248.3 285.1 384.2 2,022.0 1,632.5
Total $ 9,532.0 $ 9,125.8 $ 2,627.6 $ 2,306.1 $ 12,159.6 $ 11,431.9

Additional information on the State of Connecticut's capital assets can be found in Note 10 on page 71 of this report.

Long-term Debt.

The state, pursuant to various public and special acts, has authorized a variety of types of debt which fall into the following categories: direct general obligation debt, which is payable from the state's general fund; special tax obligation debt, which is payable from specified taxes and other funds; and special obligation and revenue debt, which is payable from specified revenues and other funds.

State of Connecticut's Outstanding Debt
General Obligation and Revenue Bonds (in Millions)

Governmental Business-type Total
Activities Activities Primary Government
2003 2002 2003 2002 2003 2002
General Obligation Bonds $ 9,216.4 $ 8,527.4 $ - $ - $ 9,216.4 $ 8,527.4
Transportation Related Bonds 3,205.8 3,174.9 - - 3,205.8 3,174.9
Revenue Bonds - - 1,555.2 1,504.8 1,555.2 1,504.8
Total $ 12,422.2 $ 11,702.3 $ 1,555.2 $ 1,504.8 $ 13,977.4 $ 13,207.1

In Fiscal Year 2003 the state increased net outstanding bonds by $0.8 billion. For the year, outstanding debt in governmental activities increased by 6.2 percent and for business-type activities the increase was 3.7 percent. It should also be noted that the state also issued $219.2 million in economic recovery notes (see note 17, page 76). The state's General Obligation bonds are rated Aa3, AA and AA by Moodys, Standard and Poors and Fitch respectively. Special Tax Obligation bonds are rated A1, AA-, AA- by Moodys, Standard and Poors and Fitch respectively.

Section 3-21 of the Connecticut General Statutes provides that the total amount of bonds, notes or other evidences of indebtedness payable from general fund tax receipts authorized by the General Assembly but have not been issued and the total amount of such indebtedness which has been issued and remains outstanding shall not exceed 1.6 times the total estimated general fund tax receipts of the state for the current fiscal year. In computing the indebtedness at any time, revenue anticipation notes, refunded indebtedness, bond anticipation notes, tax increment financing, budget deficit bonding, revenue bonding, balances in debt retirement funds and other indebtedness pursuant to certain provisions of the General Statutes shall be excluded from the calculation.


This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the state's finances and to demonstrate the state's accountability for the money it receives. If you have any questions about this report, please contact the State Comptroller's Office at 1-860-702-3350.