Opening the State's Books to the People of Connecticut
Since taking office in 1995, one of State Comptroller Nancy Wyman's major priorities has been to increase scrutiny of how taxpayer dollars are spent by the state government.
This year, Comptroller Wyman is proposing two initiatives that would use the latest in computer and Internet technology to help control spending and open up the state's checkbook in unprecedented detail for both taxpayers and policymakers.
Comptroller Wyman believes that Connecticut's citizens, public advocacy groups, academics and the media play an important oversight function in the government's system of checks and balances.
When these groups have and use this information to influence policy, government can operate more efficiently and effectively to serve its taxpayers. In order to function properly, however, these groups need ready access to state financial information that is both current and understandable.
To enhance the free flow of state fiscal data, Comptroller Wyman several years ago developed an internet web site (osc.ct.gov). Presently, this site contains a wealth of current and historical information on state finance. This includes monthly and annual reports on the state's fiscal position and the condition of the state economy; detailed expenditure and revenue data; reports and initiatives relating to key health care issues; tax rebate information; procedures used to control state spending and prevent fraud; and links to other useful public finance web sites. In addition, the web site is continually updated and improved in an effort to communicate better with the public.
One area of government spending that has been largely obscured from public view, however, is state bonding, or money the state borrows to complete many of its major projects. Connecticut has the highest per-capita tax supported bonded debt in the nation at $2,857 for every man, woman and child in the state. This is an increase of $582 from five years ago.
In Fiscal Year 1999, the state issued over one billion dollars of new bonding. The state's net outstanding bonded debt grew by $56 million last year to $9.4 billion. With the exception of the repayment of principal and interest, bonded debt is not part of the state's operating budget. Therefore, it often does not receive as much attention and public scrutiny as budgeted expenditures.
In an effort to cast light on this escalating state debt spending, Comptroller Wyman this year has created a comprehensive new database on her web site that provides immediate access to every bond allocation made in the last five years.
The entire database is searchable from the Comptroller's home page or can be downloaded directly from the web site in an Access format. Bond fund projects can be tracked in a number of ways, including by date, use of funds, recipient category and program area. A database search can be general or specific as the following two examples illustrate. A high school biology student might want to search for all allocations that went to any Connecticut municipality under the program area of the environment. Alternatively, a Bridgeport resident might want to search for 1999 allocations that went to his or her city for infrastructure improvements under the program area of urban and community development. Each month, the database will be updated as the State Bond Commission approves new items.
For the first time, the public will have detailed on-line access to current and historical state bond allocation information. By combining the new bond database with the expenditure and revenue information that is already available on its Web site and is being upgraded to include a searchable format, the Comptroller's Office will provide the public with the simplest and most complete look at the state's books ever offered.
The bond allocation database can be accessed by visiting the state Comptroller's Web site at (osc.ct.gov/finance).
Using New Technologies to Better Control State Spending
Comptroller Wyman is also leading the effort to take advantage of today's technologies to improve the state's core financial management systems. Without the proper tools, controlling state costs will continue to be an elusive goal.
Connecticut's present automated financial systems were designed and implemented in the 1980's and have changed little since that time, even as associated technology has advanced rapidly.
These systems are used to perform the state's basic financial and administrative functions, such as accounting, payroll, accounts payable and personnel. As we enter the new decade, Connecticut still employs a number of separate systems to perform these functions. This hodge-podge arrangement is technologically obsolete and is simply no longer serving the state's business needs.
Therefore, Comptroller Wyman is proposing to replace the current fractured system with a single, integrated software package that would perform all of the state's basic financial functions.
This new system would help control costs by:
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Enhancing productivity by enabling the state to take better advantage of E-commerce. |
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Standardizing technology by reducing the inefficient variety of computers, programming languages and database packages now being used. |
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Providing better management information to measure the success of specific programs. Streamlining business procedures by eliminating redundant systems. |
Comptroller Wyman estimates that the upgrade to the core financial systems would take two to three years to complete.
Performance Budgeting
As this report details, the strength of the national economy has lifted Connecticut's economy and propelled state tax revenues to historically high levels. Over the past five years, the General Fund has experienced average annual tax revenue growth of 5.4 percent while expenditures during the period grew 4.3 percent, which is double the rate of general inflation.
The result has been consistent General Fund surpluses. In this fiscal environment, there has been little passion for finding greater efficiencies in government spending. The revenues have been high enough to support inefficiencies in the delivery of government services.
In Fiscal Year 1999, revenues exceeded budget estimates by $624.4 million. Spending authorizations were increased by $572.6 million in response to the revenue windfall. Some notable areas of increased appropriations are as follow: $80 million for Hartford redevelopment; $20 million for capital improvements; $90 million for extra payroll costs; $78 million to prepay certain Medicaid costs; $60 million to pay outstanding health care liabilities for state employees; $55 million for school construction; $96.2 million for tax rebates; and $15 million for additional year 2000 computer conversions costs.
With projections pointing to more moderate future economic growth, the state cannot continue to rely on booming revenues to keep the budget in balance. In Fiscal Year 1999, the recent trend reversed itself and General Fund tax revenues grew more slowly than spending. Clearly, this pattern of spending growth will not be sustainable as we move through the next decade. Spending control must become a state priority.
Traditionally, controlling state spending has taken the form of across-the-board cuts. This is an extremely inefficient way of controlling costs. It weakens programs that are working and are cost effective, and leaves programs that fail to meet their objectives intact with reduced funding. Cost control is better achieved through performance budgeting. This method of budgeting evaluates program performance against funding levels, better identifies redundant spending, and allows policy makers and the public to see the program areas that are receiving priority funding.
Currently, state agency budgets are prepared and controlled by line item, such as personal services, other expenses, equipment, grants, etc. This method gives little information on how these expenditures impact actual programs and the policy objectives of those programs. For example, the budget for the Department of Corrections shows personal services expenditures and the amount of those expenditures that relate to overtime; however, it does not detail spending for rehabilitation programs and how that spending impacts recidivism rates.
Performance budgeting links each expenditure to its program and, therefore, to its policy objective. In reviewing areas for funding reductions, it allows policymakers to evaluate which programs are providing the best return on each dollar spent. It may also help to better identify expenditures that qualify for federal reimbursement, thus increasing state revenues.
In order to implement performance budgeting, the state must upgrade its antiquated core financial computer systems as described above.
Expanding Home Care Options for Connecticut's Elderly
Connecticut's problems in the area of long term health care have been well documented in recent years. The current system is expensive, offers too few options for seniors and depends very heavily on institutional care.
In Fiscal Year 1999, Connecticut spent nearly one billion dollars on Medicaid nursing home facilities. In addition, Connecticut ranked 49th in the nation in a recent study that measured progress toward achieving a "balanced" long term care system. In other words, Connecticut scored well below the national average in attaining a balance in spending on nursing home care compared with spending on home and community-based services. Other states have had much better success in this area. Oregon - often cited as a national model - spent 45.5 percent of its total long term care dollars on home and community-based services, compared to Connecticut's 14.2 percent.
Nursing homes are a critically important component in the long term care system; however, the level of care they provide is potentially inappropriate for many seniors. Given the choice, the vast majority would prefer to live at home with their families and in their own communities.
Unfortunately, supportive home and community-based services are often not accessible. This is especially true for those with incomes too high to qualify for the Connecticut Home Care Program for Elders. Through income "spend-down," however, it is possible for these same individuals to qualify for Medicaid nursing home care, even though it is more costly and often a less desirable option than home care.
In the upcoming legislative session, a bill will be introduced proposing a comprehensive expansion of the Connecticut Home Care Program. This legislation would allow those above the income cap to qualify for either the Medicaid waiver or state funded portion of the home care program, as long as they meet the asset limits and functional levels established for the program. In addition, those who want to participate would have to pay for a portion of the cost of their care, depending on income.
An expansion of home and community-based services would help prevent or delay premature nursing home placement. If fully implemented, estimates show the state could achieve net savings of one million dollars per year. In addition to saving tax dollars, the home care expansion would enhance the range of long term care choices available and improve the quality of life for Connecticut's older adults and their families. Therefore, State Comptroller Wyman recommends that the home care expansion be passed into law. Furthermore, the Comptroller will continue to support the search for more innovative and cost-effective ways to enhance long term care choices for Connecticut's senior citizens.
Promoting Truth in Budgeting and Improving Financial Reporting
Beginning in Fiscal Year 2002, Connecticut will apply new accounting standards in preparing its Comprehensive Annual Financial Reports. The new rules supplement the current series of fund and account group financial statements with a consolidated statement showing financial activity for all of state government, including state debt.
The new financial reporting standards will make it more difficult for states to hide problems by shifting them between account groups and funds. Another aspect of the new standards requires states to value and depreciate their infrastructure (e.g. roads, bridges, highways, etc.) so that these assets and the maintenance performed on them are displayed.
In addition to supporting the new accounting standards, Comptroller Wyman has been a long-time advocate of budgeting in accordance with Generally Accepted Accounting Principles (GAAP). She has been successful in blocking legislation that would have repealed the state's adoption of GAAP budgeting; however, GAAP implementation has been delayed until Fiscal Year 2004. In order to make sound fiscal decisions, policymakers need accurate financial data. GAAP provides greater accuracy than the present budgetary accounting system.
Currently, budgets are prepared using what is best described as modified cash accounting. Under this system, certain tax revenues are counted before they are actually earned, but expenditures are not recorded for months after the liability arises. This system distorts the state's true fiscal position.
Furthermore, the current system is susceptible to manipulation. By simply rolling the payment of bills into the next fiscal year, total state spending can be lowered in the current year, and a deficit can be turned into a surplus. GAAP removes the distortions and manipulations.