Comprehensive Annual Financial Report Commitments and Contingencies Note 23

State of Connecticut

Notes to the Financial Statements

June 30, 1995
(Amounts in thousands unless otherwise stated)

Note 23

COMMITMENTS AND CONTINGENCIES

  1. Commitments
    At June 30, 1995, the State, including its component units, had the following outstanding commitments:
    1. Infrastructure (highways, roads, etc.) and other construction contracts and miscellaneous con-tracts with various vendors totaling approximately $1,273 million of which $825 million is expected to be reimbursed by Federal grants.
    2. School construction and alteration grants with various towns for $787 million and interest costs of $351 million for a total of $1,138 million. Funding for these projects is expected to come from bond sales.
    3. Loan commitments, mortgage and grant programs, and loan guarantees totaling approximately $254 million. Funding for these programs is expected to come from bond sales.
  2. Contingent Liabilities
    The Division of Special Revenue, the agency responsible for the Lottery Fund, has entered into agreements with insurance companies under which the Lottery Fund purchases annuities under group contracts which provide payments corresponding to the State's obligation to prize winners. Not withstanding these annuity contracts, the State of Connecticut is contingently liable for the prize payments due lottery winners. At June 30, 1995, amounts due lottery winners totaled $956 million.

    The State has enacted legislation to assist the City of Bridgeport in issuing bonds to fund the city's cumulative June 30, 1988 General Fund deficit. The State is contingently liable for amounts needed annually to maintain a capital reserve fund in an amount equal to the required minimum capital reserve of such fund. The maximum principal amount authorized to be secured by the capital reserve fund is $35 million and the amount outstanding is $26 million.

    The Legislature has also enacted legislation to assist the City of West Haven by authorizing the State to guarantee debt issued by the City in an amount up to $35 million. At year end, the debt outstanding guaranteed by the State was $26 million.

    The State has entered into a contractual agreement with H.N.S. Management Company, Inc. and ATE Management and Service Company, Inc. to manage and operate the bus transportation system for the State. The State shall pay all expenses of the system including all past, present and future pension plan liabilities of the personnel employed by the system and any other fees as agreed upon. When the agreement is terminated the State shall assume or make arrangements for the assumption of all the existing obligations of the management companies including but not limited to all past, present and future pension plan liabilities and obligations. At year end, one of the State's self-insured health benefit plans was underfunded in the amount of $20.3 million. Currently, the State is negotiating a new contract with the administrator of such plan because the plan administrator wants to change the existing plan from a self- insured plan to a fully insured plan. If the State and the plan administrator agree to a new contract, it is probable that the plan administrator will relieve the State from any obligations under the existing contract.
  3. Litigation
    The State, its units and employees are parties to numerous legal proceedings many of which normally occur in governmental operations. Most of these legal proceedings are not, in the opinion of the Attorney General, likely to have a material adverse impact on the State's financial position.

    There are however, several legal proceedings which, if decided adversely to the State, may require the State to make material future expenditure for expanded services or capital facilities or may impair future revenue sources. It is neither possible to determine the outcome of these proceedings nor to estimate the possible effects adverse decisions may have on the future expenditures or revenue sources of the State.

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