State comptroller shares Connecticut's financial status

In a talk before the Wilton Kiwanis Club at its weekly Wednesday lunch on May 14 in the WEPCO building, Connecticut Comptroller Kevin Lembo explained what happened to the projected state budget surplus.
Mr. Lembo, a New Jersey native, was elected Connecticut’s comptroller in 2010. He said the biggest part of his job as comptroller is being the state’s “fiscal guardian.”
“I don’t work for the governor, I don’t work for the treasurer — I work for you,” said Mr. Lembo.
“I look at what the legislature thinks is going to happen and I look at what’s actually happening, and then let people know where we are versus what we had budgeted.”
As comptroller, Mr. Lembo works to eliminate wasteful spending, efficiently deliver government services,  address Connecticut’s growing health care crisis and strengthen budget transparency.
At the Wednesday lunch with the Wilton Kiwanis, Mr. Lembo talked about his role as comptroller, Connecticut’s financial status and some of the projects that are currently going on in Hartford.

Financial outlook

“Short term, up until last month, I projected that the state would end the fiscal year with about a $500-million budget surplus,” said Mr. Lembo. “That was based on actual spending trends.”
Mr. Lembo said income, sales and corporations were the largest tax categories and all had exceeded initial budget expectations.
At $213.1 million, Mr. Lembo said, income tax brought in the most gain.
“Connecticut, historically, when we go into a downturn, we go in late. When the rest of the country starts to drop off, we fumble along and then we go, and when we go, we go quick,” said Mr. Lembo.
“Then when we come back, historically, we pop back to the surface like a cork and we go about business as usual.”
Mr. Lembo said the most recent economy recovery process has been different from previous ones.
“It’s been up and down, up and down — overall pointing in the right direction, but people aren’t feeling that,” said Mr. Lembo.
“That budget surplus of $500 million is now $43.4 million.”
Mr. Lembo said the adjustment in general fund surplus is attributable to changes in revenue, which he said was dropping at a rate of about $50 million a day.
“Long-term, FY16 presents some real problems for us,” said Mr. Lembo.
“The state is looking at a potentially $1.3-1.4 billion budget deficit in FY16.”
Mr. Lembo said Connecticut faces budget shortfalls beginning FY16 if policies remain unchanged.

Budget reserve

In past years, said Mr. Lembo, opportunities to fully fund the budget reserve have been missed.
Since 1990, said Mr. Lembo, the general fund has experienced close to $5 billion in revenue windfalls, or what he referred to as “missed opportunities.”
Instead of filling Connecticut’s rainy day fund, most of it did not go to build reserves, said Mr. Lembo, calling it “$5 billion in missed  opportunities.”
“It didn’t just disappear. It went to other things that were not scheduled,” said Mr. Lembo.

Slow economic growth

“General fund spending growth in FY13 was held to 1.3%,” said Mr. Lembo. “This is well below the historical annual growth rate.”
He shared the difference in average, annual budget growth following the 2001 recession and the 2008 recession:

  • General fund growth: 7.3% following the 2001 recession, 2.5% following the 2008 recession.

  • Transportation fund growth: 5.3% following the 2001 recession, 1.9% following the 2008 recession.

All funds considered, the average annual budget growth following the 2001 recession was 6.7%, while the post-recession growth following the 2008 recession was 2.8%.
“That number — 2.8% — grew, which is pretty good when you consider that 20-25% of the state budget is health care,” said Mr. Lembo.

Retirement fund

Mr. Lembo shared a chart depicting the actual payment to the retirement fund versus what the actuary said should be put in between 1996 and 2013.
“In 1999, someone figured out a way to make less than the full payment and amortize the difference over the next 20 years, and still make it look like they made the full payment,” explained Mr. Lembo.
“I’m not naming names, but everybody since has had to pay their minimum payment plus the legacy gift of that 1999 decision to not make the full payment.”
When it comes to the State Employee Retirement System, Mr. Lembo explained, each year that contributions are missed, additional payment is required in subsequent years to make up for the missing contributions.
Mr. Lembo said 2013 was the first year the state noticed, “because they had to make the full payment of $1.62 billion to the fund.”

Health enhancement

Mr. Lembo spoke about the state’s Health Enhancement Program (HEP), which in the first year returned $100 million.
HEP’s second year has seen almost universal participation and compliance, increased utilization of preventive services and improved chronic disease medication adherence.
Mr. Lembo said there has also been a reduction in emergency room visits for those on the Active State Employee Plan. However, emergency visits continue to rise  for those under the Retiree Plan.


Mr. Lembo is on the board of directors of the Connecticut Foundation for Open Government Inc.
“Transparency builds accountability and enhances the common good,” said Mr. Lembo.
Not only did Mr. Lembo help redo the comptroller website, he said, but also helped launch the Open Connecticut website and pushed for economic development activity transparency.