With Phase 1 of Gov. Ned Lamont’s reopening plan underway, business owners across the state have their eyes set on the next phase of reopening, which Lamont just scheduled for three days earlier than expected, June 17. Phase 2 will allow hotels, gyms, spas, outdoor amusement parks, movie theaters to ...
Connecticut labelled ‘sinkhole state’ in report on state finances
Connecticut was labelled a “sinkhole state” and placed 49th in the nation based on its financial issues and taxpayer burden in the annual Financial State of the States report by Truth in Accounting, a government accounting think tank.
Connecticut was ranked just above New Jersey which placed 50th.
The rankings are based on analysis of each state’s bills subtracted from their available assets. The difference is then divided among the number of state residents to determine taxpayer burden. Connecticut’s taxpayer burden – or each person’s share of the debt – was $49,000.
Connecticut’s $62.4 billion of debt was the sum of the unfunded pension and state-retiree health benefits plus “other bills.” Connecticut’s assets available to pay the bills only total $11.2 billion.
In an op-ed for the Connecticut Mirror, author of the study, Sheila Weinberg, wrote “In a state where financial organizations are paving the way for the country, Connecticut should be in a much better financial position and a beacon of light for how things should be done. Unfortunately, they are not.”
The unfunded pension and healthcare liabilities were the largest factors of debt in determining Connecticut’s ranking. According to the report, Connecticut’s change in its accounting rules forced the state to include pension debt on its balance sheets. In 2014 the state only reported $2.6 billion in pension debt but that figure skyrocketed to $24.6 billion in 2015.
Connecticut’s move to Generally Accepted Accounting Principles under Governor Dannel Malloy’s administration was seen as a positive step in the right direction by accountants. But it also came with sticker shock when pension liabilities were moved to the balance sheet rather than “hidden in the footnotes of its financial reports.”
The authors of the report fault states for using “accounting gimmicks,” that have enabled “government officials have been able to hide the true cost of government, playing tricks with the balance sheet and not accurately reporting pension and retiree health care debt.”
However, the report also claims the state is “hiding” an additional $1.8 billion of pension debt and $13 billion in retiree healthcare debt from taxpayers.
According to the report, debt among the states has been a persistent problem that is usually covered up by shuffling numbers and figures on their balance sheets. “States sink further into debt while keeping the budgets ‘balanced’ through tricks such as borrowing money to balance the budget, delaying the payment of current bills until the next fiscal year, and inflating revenue assumptions.”
Connecticut has consistently been ranked in the bottom five states in the nation by analyst organizations due to it’s large debt, heavy taxpayer burden, business regulation and diminishing population.
Alaska, North Dakota and Wyoming took the top three spots in the nation, enjoying a surplus of funds on their balance sheets.
The Connecticut Office of Policy and Management is searching for a vendor who could analyze and model a complicated new taxation strategy that would replace part of the income tax with a payroll tax. If implemented, the new tax structure could result in employees seeing a pay reduction of 5 ...