2010 Annual Report on Connecticut Not Following GAAP

Each year I bemoan the voodoo budget the state legislature manages to formulate out of fantasy numbers. This year, sadly, the same. The legislature must adopt GAAP. Connecticut is still using a modified cash accounting system which allows the legislature to “balance” its budget while actually spending beyond its means. The chief trick? Recognizing revenue prematurely. Even with the huge deficits we see today, there are still expenses put off to future that shouldn’t be.

Since 2007, when State Comptroller Nancy Wyman made a play to get the Governor and the Legislature to adopt GAAP, Wyman has been quiet on the subject. Yet, buried within her monthly press releases about the state of the budget, are gems like this:

Wyman said she is also concerned that $473 million in expected state agency savings built into the 2010 budget might be overly ambitious because the budget does not specify how those savings are to be achieved.

“The policy changes required to produce that level of savings are, for the most part, not addressed,” in the budget, Wyman said.

Wyman was of course discussing the loss of payroll jobs in the state, 70,000 between August 2008 and August 2009, and how that would affect the revenue of sales and income tax collections looking ahead. Her latest comments:

Wyman said receipts of the income tax remain weak, despite an increase in the tax rate for upper-income residents. Collection of the quarterly estimated income tax payments typically made by investors is down by nearly 29.4 percent, Wyman said, and revenue from the payroll-withholding tax dropped by 4.3 percent.

The state added 1,000 payroll jobs in October, Wyman said, but still has lost more than 70,000 jobs since October 2008.

“The extra revenue associated with the higher tax rate is being offset by a continued drop in overall receipts of the income tax,” Wyman said.

Wyman said the income tax was originally projected to produce about $6.6 billion by the end of the fiscal year on June 30, but is now expected to bring in about $6.4 billion.

The sales tax is now targeted to produce about $3.1 billion in revenue, or about $27 million less than budgeted.

Does Chris Donovan or Don Williams even read the Comptroller’s reports? Guessing by the reaction to Larry Cafero and Stweart McKinley’s bipartisan budget solving request letter, the answer would be no.