COMPTROLLER LEMBO REPORTS $164.8-MILLION SURPLUS FOR FISCAL YEAR 2013

Comptroller Kevin Lembo today announced that the state’s financial outlook has improved and the Fiscal Year 2013 will likely end with a surplus of approximately $164.8 million, based on Generally Accepted Accounting Principles (GAAP).

The surplus would reach approximately $212.3 million on a modified cash basis accounting.

 

In a letter to Gov. Dannel P. Malloy, Lembo said this projection shows a slower overall rate of General-Fund spending growth of about 2 percent over last fiscal year. General Fund revenues for Fiscal Year 2013 are estimated to increase at a 3.6 percent rate over last year.

 

Lembo cautioned that the surplus is good news for the current fiscal year, but is largely attributed to unreliable revenue sources that the state may be unable to count on in the following years.

 

The surplus results from an improved revenue outlook and spending restraint,” Lembo said. “Deficit mitigation efforts, constraints on payroll growth, and fringe benefit budget reductions have contributed to the slower overall rate of spending growth.

 

“Double-digit growth in the estimated and final payment components of the income tax associated with strong capital markets and tax changes, as well as windfalls in the inheritance and estate tax, are driving the gains in receipts.”

 

As Lembo cautioned last month, “These revenue gains are welcome, but have the potential to be one-time windfalls. The slow rate of the economic recovery continues to present budget challenges.”

 

Economic data from federal and state Departments of Labor and other sources show:

• The state added 6,300 payroll jobs in April. Over the 12-month period ending in April, the state has had six months of job gains and six months of job losses. The net result over that period has been a gain of 10,800 jobs.

• According to the Department of Labor, Connecticut has recovered 57,500 positions or 47.4 percent of the 121,200 seasonally adjusted total nonfarm jobs that were lost in the state in the March 2008-February 2010 recession. The jobs recovery is now 38 months underway. A recession in the 1990s resulted in a state job loss of almost 160,000 payroll positions. It took 84 months to recover the jobs lost to that recession.
• The strongest job sectors on a year-to-year basis have been leisure and hospitality (+5,900), education and health services (+5,700) and construction (+4,000). The sectors experiencing the largest job losses are manufacturing (-2,500), government (-1,400), and financial activities (-2,200).
• Connecticut’s unemployment rate in April remained fixed at 8.0 percent; the national rate was 7.5 percent that month. Average weekly claims for unemployment rose in April, but remain well below the 2009 peak level.

• In 2012, Connecticut personal income advanced 2 percent, ranking the state 49^th nationally in income growth.
• The strongest growth in the New England region was in Vermont with growth of 3.4 percent. Nationally, income grew at a 3.5-percent rate in 2012. Quarterly personal income in Connecticut performed better in the first half of 2012 than the second half (the income figures for the 1^st quarter of 2013 will be available in June).
• According to the Department of Labor, average hourly earnings at $28.15, not seasonally adjusted, were down thirty-five cents, or -1.2 percent from the April 2012 hourly pay estimate. The resulting average private sector weekly pay was estimated at $943.03, down $34.52, or -3.5 percent over the year.
• The slow rate of job and income growth has had a significant impact on the payroll withholding component of the income tax.
• The Consumer Price Index (CPI) for all urban consumers was advancing at a 1.1-percent rate in April.
• Housing permits in Connecticut have continued to post strong gains coming into 2013. For the 12-month period ending in April, housing permits were close to 60 percent from the same period last year. This is almost double the national growth for the period.
• According to the Census Bureau, U.S. new home sales increased 29 percent from last March. Sales in the Northeast were up 3.4 percent from April of last year. Nationally sales in April were above March levels; in the Northeast sales declined in April.
• Results for the larger existing home sales market, according to the National Association of Realtors (NAR), were: Nationally, April sales were up 0.6 percent from the previous month, and sales were up 9.7 percent from April of last year. Home prices were up a solid 11 percent from one year ago. Prices have increased for 14 consecutive months for the first time since the 2005-2006 market acceleration. The median time a home was on the market was 46 days based on April data, down from 83 days a year ago. Existing home sales in the Northeast were up 1.6 percent on a month-over-month basis in April. Sales were up 4.9 percent from April of last year. Home prices in the Northeast were up 5.1 percent for the year to a median price of $245,100.
• At this writing, major equity markets are up over 100 percent since January 2009. Stocks are still trading close to historical medians of price to earnings at around 18 times earnings.

S&P:

Dow Industrial Average

Consumers

• April advance retail sales were up 3.7 percent from the same month one year ago. The strongest gains were in automobiles, and non-store retailers.
• The Conference Board’s Consumer Confidence Index hit a five-year high in May. Consumers were considerably more optimistic about the short-term outlook. Those expecting business conditions to improve over the next six months increased to 19.2 percent from 17.2 percent, while those expecting business conditions to worsen decreased to 12.1 percent from 14.8 percent.
• According to the Federal Reserve, consumer credit increased at a seasonally adjusted annual rate of 5-3/4 percent during the first quarter. Revolving credit was little changed, while non-revolving credit increased at an annual rate of 8 percent. In March, consumer credit increased at an annual rate of 3-1/2 percent.

 

Business and Economic Growth

• Based on advance estimates, real Gross Domestic Product grew at an annual rate of 2.5 percent in the 1^st quarter of 2013. This follows 4^th quarter growth of just 0.4 percent.
• First quarter corporate profit data will be released on June 26. Corporate profits advanced 6.8 percent in 2012 after growth of 7.3 percent in 2011. Net dividend distributions in the 4^th quarter of 2012 were up 23.2 percent from the same quarter a year ago.
• With respect to corporate financial reporting and related transparency issues, many investors are concerned with recent SEC rules that relax the reporting standards for subsidiary activity. At a time that investors and policy makers are seeking a more complete understanding of complex corporate structures and offshore activity, the new disclosure rules are moving in the opposite direction. This makes the work of institutional investors like state pension plans and federal and state tax policy analysts more difficult.

 

The SEC rules were discussed in a May 22 Wall Street Journal article. The Journal reported that some of the biggest U.S. companies have quietly removed hundreds of offshore subsidiaries from their public financial disclosures over the past several years. Software maker Oracle Corp., for instance, disclosed more than 400 subsidiaries in its 2010 annual report. By 2012 the list had been whittled to eight—five of which were located in Ireland. Oracle declined comment. Google went from over 100 subsidiaries reported in 2009 to zero. Microsoft, FedEx and Raytheon also shed hundreds of subsidiaries from their reporting.

The reporting change stems from SEC rules that demand disclosure only when the subsidiary activity is deemed “significant”. One result of the change is that companies limit information about offshore operations, in particular units operating in countries regarded as tax havens. For many investors, even small disclosures matter. Information about a company's subsidiaries can indicate whether its operations have diversified, how complex the company’s financial transactions may be, and how global income is moving. The lists of subsidiaries have been a reliable source for such information.

***END***

Tara Downes
Director of Communications
Office of the State Comptroller
860-702-3308

 

Keeping jobs unfilled yields town surplus

As published in the Record Journal, Thursday January 26, 2012

By Russell Blair
Record-Journal staff
rblair@record-journal.com
(203) 317-2225

WALLINGFORD — The town ended the 2010-11 fiscal year with a surplus largely due to town employee positions’ remaining unfilled, a practice that has become more common in tough fiscal times. According to an audit of Wallingford’s finances released in December, the town ended the fiscal year $671,000 in the black. But a large amount of the surplus can be attributed to the retirement of 10 town employees who weren’t replaced.

“No amounts were budgeted for 10 open positions in the General Government: three in Public Works, three in the Comptroller’s office and four police officers,” the audit said. “These positions were vacated by retired employees and will probably remain unfilled until the economy recovers.”

In the current fiscal year, the Police Department’s salaries budget was cut by $170,106. Police Chief Douglas Dortenzio said Wednesday he wouldn’t be asking for additional officers in next year’s budget. The request has been denied in the past. The department has 71 sworn officers, including Dortenzio, and a total of 91 positions including clerical staff.

Dortenzio said that when a position remains vacant for a year, it is generally eliminated from the budget. Staffing is down about 6 percent from a couple of years ago, he said.

The department has had to shift officers around and make changes, including reducing the size of the detective bureau, to get more uniformed officers on the street.

“We do the best we can with what we have,” Dortenzio said. But, he noted, “the town has grown, and we have not kept pace.”

Mayor William W. Dickinson Jr. said that, in tough economic times, the town has had to cut back to avoid increases in taxes, and he doesn’t expect many new hires.

“Chances are, some, if not all of these positions will remain unfilled,” Dickinson said. “The police no longer has a DARE program; Public Works has lost positions that handled landscaping duties.” But John Sullivan, a Democratic town councilor, said he doesn’t think a surplus matters if it comes at the expense of public safety officers.

“I always have concerns about police, fire and emergency response,” he said.

According to the audit, public safety expenditures in 2010-11 were $708,000 below budget due to $412,000 less in police wages, “due to the time lag in replacing employees who retired or resigned and less overtime.”

Dickinson said that the town isn’t getting any new money, and that, short of a large increase in the grand list, services have to be trimmed.

He said the departments have been continuing to provide services but that they’ve had to “get back to core missions.”

“Just the essentials,” Dickinson said.

Sullivan said that other budgets have ended in a surplus for similar reasons, and the extra money isn’t always a good sign. “This is typical every budget year,” he said. “And who is the big loser? The people in Wallingford.”

Dickinson countered by saying that the $671,000 surplus didn’t tell the whole story, and that $4 million to $5 million of the town’s general fund was used to cover expenses and stave off a tax increase.

$671G surplus up in Wallingford, but mayor still cautious

As published online at NHRegister.com on Wednesday, January 04, 2012

By Luther Turmelle
North Bureau Chief
lturmelle@nhregister.com
Twitter: @lutherturmelle

WALLINGFORD — The town finished fiscal 2011 with a $671,000 surplus, compared to $406,000 during the previous fiscal year, according to the annual municipal audit.

Usually, even a modest surplus is reason for some cheer among town officials. But Mayor William Dickinson Jr. said Tuesday that without significant new revenue coming in, the surplus doesn’t tell the whole story.

“I think the town is in sound fiscal health,” Dickinson said. “But our fiscal decisions are dependent upon the local taxpayer footing the bill and the worry is there is not an indication of new revenue coming in. So, we’ve got to be very cautious about how we spend.”

Dickinson acknowledged he won’t know for certain whether the town’s tax revenue will increase until the end of this month, when Wallingford files its grand list with the state. Last year, for the first time since Dickinson took office in 1986, the town’s overall value of taxable property went down.

The audit also revealed that the town’s net assets — which represents the combined dollar value of government and business activity — increased by $3.43 million to $353.48 million in fiscal 2011, which ended last June 30, said James Bowes, Wallingford’s comptroller.

“The fact that out assets are still growing, given the difficult nature of the economy, is good news,” Bowes said.

The town’s debt load decreased by nearly $2.74 million in fiscal 2011.

Call Luther Turmelle at 203-789-5706 or follow him on Twitter @LutherTurmelle. To receive breaking news first, text the word NHNEWS to 22700. *Msg+data rates may apply. Text HELP for help. Text STOP to cancel.

CRRA surplus payment to help reduce Wallingford’s budget

As Published in the Record Journal Sunday April 18, 2010

By Dave Moran
Record-Journal staff
dmoran@record-journal.com
(203) 317-2224

Follow all the news directly on the Record Journal Website for the most up to date information. www.myrecordjournal.com

Write a letter to the editor letters@record-journal.com

WALLINGFORD — Amid sizable cuts to both the Board of Education and general government budgets for 2010-11 and a proposed nearly four percent tax hike, there’s a relatively small item that could lead to big savings in the future.

In an effort to reduce budget costs and tackle some looming capital projects, Mayor William W. Dickinson Jr. has proposed using an estimated $5 million payment the town expects later this year from the Connecticut Resources Recovery Project to fund a number of infrastructure improvements for the town and school system. The items do not count against his $141.5 million budget proposal because they are classified as capital expenses.

Last year, the town received a $7.2 million surplus payment from CRRA, which owns a trash-to-energy facility on South Cherry Street that is used by Wallingford and surrounding towns.

Facing requests that he apply at least some of that money to his budget proposal last year to reduce the tax rate, Dickinson, a Republican, instead reserved it for the purchase of a new fire truck and the construction of a new station for the North Farms Fire Department, a project that still lacks a timetable for completion. This year, Dickinson opted to remove a number of capital item requests from the budget requests of several departments and fund them separately through the surplus payment, thus reducing the town’s overall budget and the amount of taxpayer dollars needed to fund it.

“It’s one-time money, so we certainly didn’t want it to impact the operational budget because it won’t replace itself,” Dickinson said about his decision to use CRRA funds for capital improvements. “It seemed appropriate to spend the money on capital items that are necessary and won’t repeat.”

Comptroller James Bowes said although the expected payment is not being applied directly to the budget, it will still lead to savings in future budget years by eliminating a number of capital projects that would need to be funded through future budgets.

“We aren’t going out and looking for items to spend money on,” Bowes said. “We are addressing needs that are coming in next year’s budget and very shortly thereafter that we’re going to have to attack through taxpayer dollars if we don’t utilize these funds.”

The CRRA distribution will pay for two new snow plow trucks for the Public Works Department, a new ambulance for the Fire Department and roof replacements to both fire and police headquarters.

But the bulk of it, more than $1.2 million, will be used to fund improvements to the school system, including new bleachers for Mark T. Sheehan High School, boiler repairs for several schools and a $600,000 energy efficiency retrofit project that is forecasted to shave almost $500,000 from the system’s annual utilities costs.

Thomas Hennessey, Board of Education chairman, said those capital improvements will not have to be accounted for by the system in future budgets and that the energy savings project will yield immediate savings. Both help to cushion a more than $2.5 million reduction that Dickinson made to the school system’s budget request, he said.

“The energy stuff will save us hard money eventually, because every year we are going to be spending less and less money,” said Hennessey, a Republican. “The capital improvements are things that we would have had to do eventually.”

John Sullivan, a Democratic councilor, said he supported Dickinson’s use of the CRRA funds because even though the money is not being injected directly into the town’s operating budget, it is being used to remove a number of costly capital projects from the upcoming and future budget years.

“We don’t have to use tax dollars to pay for those items,” Sullivan said.

Meriden and Cheshire, which also took part in the CRRA trash disposal project that led to the surplus accounts, don’t plan to use any of the surplus money to fund their general operating budgets either.

Cheshire plans to bolster several of its reserve funds, like pension contributions and debt service, while Meriden wants to add the money to its undesignated reserves in an effort to strengthen the city’s bond rating, which appears set for an upgrade, city officials said Friday.

“Meriden is still in a situation where we believe there is a need to build the reserves a bit higher than where they are presently, so we’re not budgeting the CRRA money,” City Manager Lawrence Kendzior said.

Paul Nonnenmacher, the resource authority’s director of public affairs, said there is no timetable for when the surplus funds might be distributed to the town. Dickinson said that Wallingford will not implement any of the capital improvement projects until it receives the funds.