State Treasurer
Denise Nappier
Photo credit:
Office of State Treasurer
Posted 8/23/10
Last week the State Bond Commission approved about $520 million in bonding for a variety of projects, including state funds for a New Haven to Springfield commuter rail line. Two Republican lawmakers on the Commission, Rep. Vincent Candelora (R-North Branford), and Sen. Andrew Roraback (R-Goshen), voted “no”. It’s not that they oppose the projects, they were protesting what they claim is imprudent money shifting.
The two lawmakers, and House GOP leader Lawrence Cafero (R-Norwalk) contend that the state has a serious cash flow problem, and was intent on raiding money from the bond authorizations to ease that situation.
“I cannot support using the Bond Commission as an ATM to fund every day government expenses,” said Candelora. “You cannot tell taxpayers this money will pay for rail improvements—when you know that is obviously not the case.”
Candelora based his claims on an August 9th memo from Democratic State Treasurer Denise Nappier which stated that without the $520 million in bond authorizations, the state’s cash position could fall to $600 million by December “equivalent to just over one week of overall state expenditures.” Nappier also wrote that “bond fund proceeds may be temporarily borrowed to fund other expenditures for short periods of time,” but must be repaid so they are available for capital projects.
“When I’ve got a memo that says we’ve got to bond or we’ll run out of money to pay vendors, it seems to suggest that there is not enough operating cash in our coffers,” said Candelora. He was supported by Cafero. “When you have the Treasurer say we’ve got one week’s worth of pay in the bank, and if we don’t do this (authorize bonding) we’re in trouble, we’re in trouble!,” said the GOP leader.
Instead of backing up the GOP lawmakers, Republican Gov. Jodi Rell dismissed the controversy. “We do not, according to the Treasurer, have a cash flow problem,” said Rell. House Speaker Chris Donovan (D-Meriden) also rapped the GOP lawmakers, claiming some state revenues are improving. “How can you say we’re in dire straits when we’re actually reducing our debt,” said Donovan. “The sky is not falling,” he declared.
By week’s end, Nappier issued a formal retort to the GOP lawmakers’ charges, in a letter to Rell, chalking up the controversy to misconceptions.
“First and foremost, the current cash position of the State is strong,” Nappier wrote. “We are not currently using bond proceeds to cover operating costs; the State rarely has engaged in internal borrowing from its bond fund accounts,” she said.
Nappier further stated that when “temporary internal bonding from bond funds for the common cash pool” does occur, it is done “in conformance with a long-standing and time-tested policy.” The Treasurer also argued that internal borrowing, when needed, actually reduces the state’s costs and risks, because short-term borrowing in the market place would be costly.
Stung by the Republican complaints, Nappier said in her letter to Rell that she considers the criticism to be “rank political posturing” during the campaign season. She vowed to talk with the three major bond rating agencies to insure they can separate “truth from fiction” if they catch wind of the controversy. Nappier said while Connecticut still faces major deficit worries next year, that impending crisis has not been aggravated by the state’s cash management practices.
To quell any future criticism, Nappier did say she will provide greater transparency in how the state manages its money by signaling when any temporary borrowing from bond fund balances occurs, the amounts moved, and when the transferred monies are returning to the bond funds.
Greater transparency is what Candelora was seeking in the first place.