STATE OF CONNECTICUT
THE STATE COMPTROLLER
WYMAN PROPOSES INCREASING RAINY DAY FUND, REINVESTING
|Contact: Steve Jensen|
State Comptroller Nancy Wyman today proposed increasing the state's emergency Rainy Day Fund and distributing the fund's annual interest to every city and town in the state - a plan designed to help protect municipalities and taxpayers against an economic slowdown.
Wyman's proposal would deposit a projected additional $213 million of the fiscal year 2001 surplus in the Rainy Day Fund, bringing the fund balance to $777 million. It also would direct about $41 million of interest earned by the fund to a Municipal Revenue Sharing Account for distribution to all Connecticut's cities and towns.
Wyman said her proposal would give the state and its communities additional protection against a weakening of the economy. She suggested that cities and towns direct the grant money toward their own emergency funds, or use it for debt avoidance or one-time expenses.
"This plan could allow both the state and its municipalities to deal with an economic downturn without having to rely solely on raising residents' taxes," Wyman said. "I would strongly urge leaders of our cities and towns to use this money as an investment, not as a reason to increase government spending."
State economic projections show moderating growth in employment, income, retail sales and the housing market in coming years. If the projections hold and recent enormous gains in the financial markets subside, state revenue growth can also be expected to decline.
Currently, surplus funds are deposited annually in the Rainy Day Fund to bring it to 5 percent of net general appropriations. Wyman's proposal calls for the fund to be raised to up to 6 1/2 percent of net general appropriations. Each one-percent increase in the Rainy Day Fund raises the fund balance by $120 million, based on fiscal year 2002 estimates.
Interest earned by the Rainy Day Fund is currently transferred annually to the state's General Fund. Under Wyman's proposal, about $41.2 million of interest generated by the fund next fiscal year would be granted to municipalities under a revenue-sharing formula used last year to distribute a portion of the state surplus to cities and towns.
Funding a municipal revenue sharing program is a legislative priority for the Connecticut Conference of Municipalities, an association of municipal leaders.
Connecticut is one of 45 states that have Rainy Day Funds. The most common fund balance is 5 percent, and the second most common level is 10 percent.
A study conducted by the Center for Budget and Policy Priorities concluded that forty states would need to increase their emergency funds in order to sustain current levels of state spending during such a recession. Connecticut was among a group of states that would fall 15 percent to 20 percent short on revenues in a hypothetical two-year recession.
The State Comptroller appreciates input on this and other issues from residents of the state. Please feel free to contact her office by phone - (860) 702-3300; mail - OSC, 55 Elm Street, Hartford, CT 06106; or, via E-mail - email@example.com
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