A dispute dating back to 2009 bubbled up to the surface at Monday’s state Bond Commission meeting. The disagreement pitted Republican Gov. M. Jodi Rell against Republican lawmakers, who don’t believe that state Treasurer Denise Nappier is being honest about the state’s cash position.
“We do not, according to the Treasurer, have a cash flow problem,” Rell said. “These were dollars that were already going to be borrowed.”
Rell was referring to the $520 million in general obligation bonds approved Monday by the state Bond Commission.
Back in 2009 when the state’s revenues were lagging, Rell gave Nappier the authority to use $581 million short-term bond anticipation notes, which today were rolled over into $520 million in long-term general obligation bonds. The last time this type of financial transaction occurred was back in the 1990s. The Treasurer asked and received authority to use short-term bonds in 2002-03, but never needed to issue them.
The short-term bonds or BANs were used as a stop gap measure to pay for some operating expenses in anticipation of bond authorizations when less tax revenue was coming into the state’s cash pool. Republican lawmakers see the transaction as borrowing to cover previously borrowed debt.
“At the time, the Treasurer’s office asked for that authority to prevent a cash flow problem,” Rell added as she looked around for Nappier to see if she wanted to explain the complex financial transaction further.
Earlier at the Bond Commission meeting Nappier contended that it wasn’t “rocket science,” and rolling over the BANs into long-term debt will help that state’s cash position while meeting all of its debt service requirements.
Rep. Vincent Candelora, R-North Branford, said his concern is that the state is borrowing from capital projects to pay for its operating expenses.
Candelora, a member of the Bond Commission, said he voted against all the items on the agenda Monday because he’s concerned “we’re potentially using our bond funds to operate government.”
He said Nappier’s office even admits in an Aug. 9 memo that “without the issuance of those bonds, our cash position would fall to approximately $600 million in December, equivalent to just over one week of overall state expenditures.”
House Minority Leader Lawrence Cafero said sometimes you can’t control the amount of taxes coming into the pool, but you can control the spending coming out of the pool and that’s where the legislature should be focusing its energy.
He said at least state’s like California don’t mix their cash into one big pool so when taxes are lagging and they need to borrow money to cover it, they use tax anticipation notes to pay for the spending. He said that approach is more honest than commingling all the cash in one pool, like Connecticut does.
He said at the moment Connecticut is not being honest because it’s saying we’re borrowing money for a new railroad system, but we’re going to use the money to pay the electric bill first.
House Speaker Chris Donovan said it’s the Treasurer’s job to figure out how to move the cash around.
“You pay certain bills at certain times, and that’s the Treasurer’s job,” Donovan said.
He said the Treasurer has assured the public and the governor that everything is going fine and the bills are being paid.