Commentary: When is a surplus not a surplus?

If you borrow $100 from a friend and spend $80, are you $20 richer in the end? Or, do you still owe someone $100?

I think most people would agree that you are still $100 in debt.

Kevin-Kelly-from-the-capitalWhen it comes to Connecticut’s budget, and the projected surplus, we have to keep this borrowing example in mind.

For fiscal year 2014, Connecticut is expected to have $504.4 million left over at the end of the year. Some people refer to this number as a “surplus.”

But it is not really a surplus. We are not in the black yet, because a huge chunk of the budget was borrowed to begin with.

 

Borrowed almost $1 billion this year

Connecticut borrowed over $1.5 billion over the past few years, including $914.2 million in fiscal year 2014, to pay for resources that used to be covered by the general fund. Relying on state borrowing at such a high level is like relying on a credit card to pay your bills.

Spending is out of control, and the only way the state has been able to pay its bills is through borrowing a huge amount of money.

Having an excess of more than $500 million may seem like a good thing at first, but when you think about how much the state is in debt based on borrowing, that leftover money cannot be called a “surplus.”

 

Paying interest on  that borrowed money

This situation is a little more serious than owing your friend money. Chances are your friend will not charge you interest on that $100 you borrowed. Connecticut, on the other hand, is responsible for a paying back everything, plus interest.

Perhaps it is better to compare this situation to taking out a home equity loan. If you secure a loan of $20,000, but your home improvement project only costs $19,000, does that $1,000 “surplus” mean you made money?

No, of course not. You still have to pay the bank back for the entire loan, plus interest.

Our state “surplus” is not a real surplus because most of the money was borrowed to begin with.

 

One-time gimmicks used as well

The state grew its coffers with $867.6 million worth of one-time budget items, including pushing out debt for two years, moving millions of operating dollars to bonding, and relying on hundreds of millions of dollars from one-time revenue sources, like the tax amnesty program and raids on the Special Transportation Fund.

These tactics are gimmicks, and the state is projected to face a deficit of over $2 billion come fiscal year 2016.

The state borrowed money and we have to pay it back. Until we get out of debt, it is impossible to have a true surplus.

 

Kevin Kelly represents the 21st Senatorial District, which includes all of Shelton as well as parts of Monroe, Seymour and Stratford. Reach him at 800-842-421 or [email protected]

 

 

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