FISCAL ACCOUNTABILITYFISCAL ACCOUNTABILITYOF STATE GOVERNMENTOF STATE GOVERNMENT

Presentation Prepared for the Appropriations Committee and

the Finance, Revenue, and Bonding Committeeby the Office of Policy and Management

November 27, 2006

2

ECONOMIC AND ECONOMIC AND DEMOGRAPHIC TRENDSDEMOGRAPHIC TRENDS

“One of the greatest pieces of economic wisdom is to know what you do not know.”

- John Kenneth Galbraith

3

ECONOMIC INDICATORS

Fiscal Fiscal Fiscal Fiscal Fiscal 2005- 06 2006- 07 2007- 08 2008- 09 2009- 10

UNITED STATES

Gross Domestic Product 6.7% 6.2% 5.6% 5.3% 5.2%

Real Gross Domestic Product 3.4% 2.9% 3.0% 3.0% 3.1%

G.D.P. Deflator 3.1% 3.2% 2.6% 2.2% 2.0%

Housing Starts 1.0% - 18.4% - 2.8% 1.3% 0.7%

Unemployment Rate 4.8% 4.8% 4.9% 4.7% 4.5%

New Vehicle Sales (M) 16.64 16.29 15.97 16.00 16.15

Consumer Price Index 3.8% 2.9% 2.2% 2.1% 2.1%

CONNECTICUT

Personal Income 5.6% 5.7% 5.1% 4.7% 4.7%

Nonagricultural Employment 0.7% 0.5% 0.9% 0.7% 0.7%

Unemployment Rate 4.6% 3.8% 3.9% 3.7% 3.7%

Housing Starts - 5.5% - 17.7% 6.7% 4.6% - 0.3%

M denotes millions.

ASSUMPTIONS USED TO DEVELOP REVENUE ESTIMATES

4

SIGNIFICANT DEMOGRAPHIC TRENDS

Projections of The Population in Connecticut(Mid-Year Resident Population In Thousands)

1990 2000 % ChangeAge Group Census Census 2010 2020 2030 2000- 2030

Total 3,287.1 3,405.6 3,577.5 3,675.7 3,688.6 8.3%

0- 17 737.6 841.7 814.0 816.3 823.4 - 2.2%

18- 44 1,452.3 1,304.3 1,257.5 1,258.5 1,217.9 - 6.6%

45- 64 651.3 789.4 990.4 958.2 852.9 8.0%

65 and Over 445.9 470.2 515.6 642.5 794.4 68.9%

85 and Over 47.1 64.3 93.7 105.6 132.4 105.9%

Median Age 34.4 37.4 39.6 39.7 41.1 9.9%

Projections

5

DEMOGRAPHIC TRENDS

Workers Per Person Under 18 Years of Age (Workers Aged 18 to 64 Years)

2.5 2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000 Census 2030 Proj.

Year

Wo

rker

s S

up

po

rtin

g O

ne

Ch

ild

Workers Per Person Over 64 Years of Age (Workers Aged 18 to 64 Years)

4.5

2.6

0.0

1.0

2.0

3.0

4.0

5.0

2000 Census 2030 Proj.

Year

Wo

rker

s S

up

po

rtin

g O

ne

Eld

er

6

BUDGET PROJECTIONSBUDGET PROJECTIONS

“Beware of little expenses; a small leak will sink a great ship.”

   - Benjamin Franklin

7

BUDGET PROJECTIONS

• Expenditures grew dramatically in fiscal 2006 and are projected to rise significantly in fiscal 2008

• The general fund is projected to register deficits beginning in FY 2008, if spending is left unchecked

• The income tax is projected to yield modest steady growth after a four fiscal year growth in estimates and final payments of over 97%

• Sales tax collections are forecasted to remain relatively stable (11.7% over projection period)

8

BUDGET GROWTH RATESGENERAL FUND

BUDGET GROWTH RATES

10.4%

5.1%

3.5%2.3%

4.9%

9.0%

0%

2%

4%

6%

8%

10%

12%

2005 2006 2007 2008 2009 2010Est. Fcst. Fcst. Fcst.

Fiscal Year

9

PROJECTED BALANCE OF THE GENERAL FUNDSTATE OF CONNECTICUT

General Fund Surplus/(Deficit)

Note: Fiscal years 2008-2010 assume appropriations prior to reductions required by the Constitutional expenditure cap.

$302.2$363.9

$446.2 $486.5

($695.1)

($899.7)($848.9)

- $1,000

- $800

- $600

- $400

- $200

$0

$200

$400

$600

2004 2005 2006 2007Est.

Fiscal Year

Millions

2008 Fcst.

2009 Fcst.

2010 Fcst.

10

CONNECTICUT REVENUESCONNECTICUT REVENUES

“In the end it's a revenue stream. And all revenue streams eventually reach the sea.”

- Paul Schrader

11

PERSONAL INCOME TAXEconomic Growth Rates of the Personal Income Tax

5.0

%

5.0

%9.5

%

8.7

%

-1.5

%

-1.8

%

6.0

%

7.8

%

6.0

%

7.1

%

5.0

%

21.9%

-14.7%

-23.5%

19.0%

14

.9%

22.8%

10

.6%

19.4%

5.0

%

5.0

%

5.0

%

-28%

-21%

-14%

-7%

0%

7%

14%

21%

28%

2000 2001 2002 2003 2004 2005 2006 2007Est

2008Fcst

2009Fcst

2010Fcst

Fiscal Year

Eco

nom

ic G

row

th R

ate

Withholding

Est & Finals

12

$1,501.0

$1,785.8

$1,361.7$1,230.6

$1,588.4

$1,943.5

$2,322.0

$2,565.8

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

$2,600

$2,800

2000 2001 2002 2003 2004 2005 2006 2007

Fiscal Year

Est

. &

Fin

al R

even

ueEstimates and Finals Component

of the Personal Income Tax(in millions)

13

ESTIMATES AND FINAL PAYMENTS P.I. Tax Growth Rates For Selected Months

Fiscal Years 2005-2007

10.8%

25.8%

31.2%30.0%

22.8%

28.1%

17.6%

23.1%

14.0%

19.0%

10.0%8.1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

September December/ January April June

% G

row

th In E

stim

ates

Only

.

FY 2005 Actual FY 2006 Actual FY 2007 Actual FY 2007 Forecast

ESTIMATED PAYMENTS

17.9%20.9%

9.0%

- 40%

- 30%

- 20%

- 10%

0%

10%

20%

30%

FY 2005 FY 2006 FY 2007

FINAL PAYMENTS

14

SALES AND USE TAX

ECONOMIC GROWTH RATES OF THE SALES AND USE TAX

3.8

%

3.7

%

3.8

%

2.6

%

3.5

%

3.9

%5.1

%

-8.2

%

1.3

%

4.9

%

7.1

%

-11%

-8%

-5%

-2%

1%

4%

7%

10%

2000 2001 2002 2003 2004 2005 2006 2007Est

2008Fcst

2009Fcst

2010Fcst

Fiscal Year

Eco

nom

ic G

row

th R

ate

15

BUDGET RESERVE FUNDBUDGET RESERVE FUND

“Balancing the budget is like going to heaven. Everybody wants to do

it, but nobody wants to do what you have to do to get there.” - Phil Gramm, Senator, TX

16

STATES WITH BUDGET RESERVE FUNDS

Rank State Reserve in Millions % of Expenditures

1 Wyoming 892 71.8%

2 Alaska (1) 2,300 36.5%

3 New Mexico (2) 697 13.0%

4 South Dakota 137 13.0%

5 North Dakota 100 10.4%

6 California 9,009 9.7%

7 Nebraska 274 9.4%

8 Oklahoma 496 9.0%

9 Louisiana 682 8.8%

10 Virginia 1,306 8.6%

11 Massachusetts 2,160 8.4%

12 Iowa 392 7.8%

13 Connecticut 1,112 7.6%

20 New Hampshire 69 5.2%

24 Vermont 52 4.7%

31 Rhode Island 95 3.1%

32 Maine 80 2.8%

National Average 6.4%

Source: National Association of State Budget Off icers, preliminary FY2006 data, except

(1) Unaudited f igures provided by Alaska Office of Finance

(2) Final f igures provided by New Mexico Board of Finance

GENERAL RESERVE FUNDSFiscal Year Ending June, 2006

17

BUDGET RESERVE FUND BALANCEBUDGET RESERVE FUND

18

Balancing the State Budget During the FY02 & FY03 Economic Downturn Required the Following

Actions1. Draining of the then Fully Funded Budget Reserve Fund

2. Deficit Financing of over $300 million

3. Layoffs of over 2,500 state employees

4. Permanent Tax Increases on All Citizens Including:Raising the Personal Income Tax rate from 4.5% to 5.0%Increasing the Cigarette Tax rate from $1.11 to $1.51 per packReduction in the Sales Tax Clothing Exemption from $75 to $50 per item

5. Significant Saving Initiatives Including:Implementation of an Early Retirement ProgramTightening eligibility, eliminating coverage, and freezing enrollment in the Medicaid and HUSKY programsClosing intake to the Child Care programLimiting continued coverage under Temporary Family AssistanceReducing reimbursement levels to medical providersIncreasing client cost- sharing and co- payments for health care programs

19

BUDGET RESERVE FUND SHORTFALL

BUDGET RESERVE FUND AMOUNT BELOW TARGET

($145.5)

($79.3)($22.6)

$0.0

($373.5)

($400)

($200)

$0

FY06 Est. FY07 Est. FY08 Fcst FY09 Fcst FY10 Fcst

Milli

ons

20

THE EXPENDITURE CAPTHE EXPENDITURE CAP

“Always do right. This will gratify some and astonish the rest.”

-Mark Twain

21

10.8%

9.6%

4.8%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

'87- '91 '79- '93 '93- '07

Fiscal Year

An

nu

al %

Gro

wth

in E

xp

end

itu

res

ORIGIN OF THE EXPENDITURE CAPGROWTH IN STATE SPENDING

22

THE EXPENDITURE CAP – AN EFFECTIVE TOOL

USE OF GENERAL FUND SURPLUSES

FY1996 to FY 2006

23

EXPANDING COMMITMENTSEXPANDING COMMITMENTS

“A billion here, a billion there, pretty soon it adds up to real money.”

- Senator Everett Dirksen

24

STRUCTURAL HOLES CREATED BY FUNDING ONGOING EXPENDITURES WITH PRIOR YEAR SURPLUSES

IMPACT ON FISCAL 2008 - GENERAL FUND(IN MILLIONS)

From the FY 2005 Surplus Amount

1. Early Retirement Incentive Plan (ERIP) Accruals 22.0$

2. Non- ERIP Accruals 10.0

3. Education Cost Sharing Grant 32.2

4. Priority School District Grant 7.8

5. Magnet School Grant 1.0

6. Teachers' Retirement Contributions 50.0

7. Machinery & Equipment PILOT 7.2

8. Medicaid 4.2

From the FY 2006 Surplus

9. Teachers' Retirement Contribution 125.5

10. Medicaid Carry- forwards 90.0

11. Fringe Benefits Carry- forward 35.0

12. All Other Carry- forwards 6.1

13. Revenue Transfer from FY 2006 to FY 2007 41.0

Total 432.0$

25

DEPARTMENT OF CHILDREN AND FAMILIES

DCF EXPENDITURES(In Millions)

538.8565.5

607.5668.1

729.4

793.5

891.7933.7

$200

$400

$600

$800

$1,000

02 03 04 05 06 07 Est 08 Fcst 09 FcstFISCAL YEAR

26

DEPARTMENT OF EDUCATIONDEPARTMENT OF EDUCATION GRANTS

(In Millions)

Note: Figures provided for FY02 – 05 are revenue based (not entitlement based) in that they include prior year adjustments.

27

DEPARTMENT OF MENTAL RETARDATION

DMR EXPENDITURES(IN MILLIONS)

701.0719.3 719.0

752.5

820.4

865.5

955.8

1,011.4

$600

$700

$800

$900

$1,000

2002 2003 2004 2005 2006 2007 Est 2008Fcst

2009Fcst

FISCAL YEAR

28

INCREASING PHARMACY EXPENDITURES

(IN MILLIONS)

Actual Estimated Requested Requested% Increase

FY2009 over

FY2006 FY2007 FY2008 FY2009 FY2006

Dept of Social Services $499.2 $471.2 $545.6 $589.1 18.01%

Dept of Mental Retardation 0.3 0.3 0.3 0.3 0.00%

Dept of Mental Health and Addiction Services 9.7 10.4 10.9 11.4 17.53%

Dept of Correction 14.6 17.0 18.3 19.8 35.62%

Dept of Children and Families 1.0 1.1 1.3 1.4 40.00%

Dept of Veterans' Affairs 1.0 0.9 0.9 0.9 -10.00%

Workers' Compensation Claims 2.4 2.7 3.1 3.5 45.83%

State Employees including Retirees 267.2 294.0 322.5 353.8 32.41%

Teachers' Retirement 20.1 24.2 26.6 29.3 45.77%

Grand Total $815.7 $821.7 $929.5 $1,009.5 23.76%

29

MEDICARE PART D

•MedicaidClawbackEligibilityManufacturers Rebate

•ConnPACE

•Medicare Part D Supplemental Needs Fund

•State Employee Subsidy

30

SUMMARY OF LOCAL AIDESTIMATED FORMULA GRANTS TO MUNICIPALITIES

(IN MILLIONS)

31

DEBT LEVELSDEBT LEVELS

“A balanced budget takes us in the right direction. Clearly, adding

billions and trillions of dollars to our debt takes us in the wrongdirection.”

- Tim Johnson, Representative, IL

32

DEBT BURDEN COMPARISONRanked by State Debt

Ranked by Per Capita State Debt As a % of Personal Income (PI)

Rank State Amount ($) Rank State Debt/ PI

1 ALASKA 8,709 1 ALASKA 25.6%

2 MASSACHUSETTS 7,957 2 MASSACHUSETTS 18.9%

3 CONNECTICUT 6,452 3 RHODE ISLAND 17.6%

4 RHODE ISLAND 6,010 4 CONNECTICUT 14.2%

5 DELAWARE 5,010 5 DELAWARE 14.0%

6 NEW YORK 4,964 6 HAWAII 14.0%

7 HAWAII 4,553 7 NEW YORK 13.0%

8 NEW HAMPSHIRE 4,537 8 VERMONT 12.9%

9 NEW JERSEY 4,119 9 NEW HAMPSHIRE 12.4%

10 VERMONT 4,086 10 MONTANA 11.9%

11 ILLINOIS 3,833 11 MAINE 11.8%

12 MAINE 3,532 17 NEW JERSEY 9.9%

UNITED STATES 2,560 UNITED STATES 7.7%

33

IMPACT OF DEBT EXPENSESGENERAL FUND DEBT SERVICE EXPENDITURES

$2.05$1.93$1.81$1.73$1.68$1.54$1.40$1.39$1.37$1.23$1.09

11.7%

11.5%

11.4%11.2%

11.7%11.5%

10.7%

10.6%

10.8%

11.1%

10.8%

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

$2.2

'97 '99 '01 '02 '03 '04 '05 '06 '07

Est.

'08

Fcst.

'09

Fcst.Fiscal Year

Deb

t Ser

vice

(B

illion

s)

8%

9%

10%

11%

12%

13%

Deb

t Ser

vice

As

% O

f Bud

get

34

FIVE YEAR BOND FIVE YEAR BOND PROJECTIONSPROJECTIONS

35

PROJECTED GENERAL OBLIGATION BOND ALLOCATIONS

FY2007 FY2008 FY2009 FY2010 FY2011

School Construction Program 677,000,000$ 675,000,000$ 675,000,000$ 560,000,000$ 500,000,000$

UCONN 21st Century 89,000,000 120,000,000 155,000,000 160,500,000 161,500,000

State University System 50,000,000 141,000,000 88,000,000 179,000,000 140,000,000

Community College System 132,600,000 69,800,000 146,200,000 99,500,000 68,400,000

Sub- Total Education Allocations 948,600,000$ 1,005,800,000$ 1,064,200,000$ 999,000,000$ 869,900,000$

New Public Health Laboratory - - 81,700,000 - -

Urban Action Grants 50,000,000 50,000,000 25,000,000 75,000,000 75,000,000

Manufacturing Assistance Act 45,000,000 35,000,000 25,000,000 40,000,000 40,000,000

Local Capital Improvement Program 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000

Small Town Economic Assistance Program 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000

Clean Water Grants 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000

Housing Trust Fund 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000

All other GO projects/ programs 100,400,000 84,200,000 14,100,000 101,500,000 231,600,000

Grand Total GO Bond Allocations 1,224,000,000$ 1,255,000,000$ 1,290,000,000$ 1,295,500,000$ 1,296,500,000$

36

ACTUAL & PROJECTED GENERAL OBLIGATION BOND COMMISSION ALLOCATIONS

37

DISTRIBUTION OF GO BOND FUND ALLOCATIONS

ACTUAL FY2002 - FY2006

PROJECTED FY2007 - FY2011

UCONN 21st Century10.8%

Community College System8.1%

State University System9.4%

Manufacturing Assistance2.9%

Clean Water Grants1.6%

Urban Act4.3%

All other projects/programs8.4%

DPH Lab1.3%

LOCIP2.4%

School Construction48.5%

Housing Trust Fund0.8%

STEAP1.6%

38

LONG TERM LIABILITIESLONG TERM LIABILITIES

"Zeroes are important.“

- Denis Hayes, author and contributor to Starbucks ‘the way I see it”

39

LONG-TERM OBLIGATIONS•The state’s long-term obligations total $50.0 billion.

•This equates to approximately $14,280 for every man, woman and child in Connecticut

•In comparison, total Personal Income Tax collections in FY07 will only be $ 6.625 billion.

Bonded Indebtedness $ 14.8

State Employee Pensions – Unfunded 6/ 30/ 2006 * 7.9

Teachers' Pension – Unfunded 6/ 30/ 2004 5.2

State Employee Post Retirement Health and Life - Unfunded 21.1

Teachers' Post Retirement Health and Life - Unfunded -

GAAP Deficit 1.0

Total $ 50.0

LONG- TERM OBLIGATIONS

(in billions)

* Actuarial valuation for fiscal year 2006 released on 11/16/2006.

40

UNFUNDED PENSIONSSTATE EMPLOYEES RETIREMENT SYSTEM AS OF 6/30

41

342.8 375.6415.5 425.9

474.0516.3

623.1663.9

717.1757.9

$0

$100$200

$300$400

$500$600

$700$800

$900

'00 '01 '02 '03 '04 '05 '06 '07 '08Fcst

'09Fcst

Fiscal Year

Millio

ns

STATE EMPLOYEES RETIREMENT SYSTEM CONTRIBUTIONS

CONTRIBUTIONS TO THE STATE EMPLOYEES RETIREMENT SYSTEM

Mill

ions

42

STATE EMPLOYEES PENSION &HEALTH INSURANCE – ALL FUNDS

SERS & HEALTH INSURANCE EXPENDITURES As Of 6/30

$415 $426 $474 $516$623 $664 $717 $758

$368 $394$430

$486$508

$603$615

$673

$203$240

$318

$374

$394

$436$452

$509

$986$1,060

$1,222

$1,376

$1,525

$1,703$1,784

$1,940

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

'02 '03 '04 '05 '06 '07 '08 Fcst. '09 Fcst.

Exp

end

itu

res

($M

)

SERS Active Health Ins. Retiree Health Ins. Series4

Note: FYs 07, 08 and 09 Retiree Health includes offsets for the anticpated Medicare Part D Employer Subsidy.

43

UNFUNDED PENSIONS CONNECTICUT TEACHERS RETIREMENT SYSTEM

TEACHERS RETIREMENT SYSTEM AS OF 6/30

$5.2

$3.3

$2.2

$3.2$3.0

$2.6$2.4

65%

69%68%70%

76%

67%

81%

50%

55%

60%

65%

70%

75%

80%

85%

1992 1994 1996 1998 2000 2002 2004

Unfunded Actuarial Accrued Liabilities

Fun

ded

Rat

io

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

Bill

ions

Unfunded Pensions

Funded Ratio

44

UNFUNDED PENSIONS TEACHERS RETIREMENT SYSTEM CONTRIBUTIONS

$170$176

$204 $215 $205$180 $185 $185

$396$412

$433$454

$226 $236

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2000 2001 2002 2003 2004 2005 2006* 2007* 2008Fcst

2009FcstFiscal Year

Mil

lio

ns

Surplus Funds

* For FY06 and FY07 the f igures are inclusive of $170 million and $176 million from the FY05 and FY06 Surplus Appropriation

45

SCARCE DISCRETIONARY SPENDING ROOM Fiscal 2008Requested

Budget(in millions)

Allowable Growth in Capped Expenditures 445.0$

Expenditure Increases1. State Employee Personal Services (1) 282.9$ 2. State Employee Retirement Contributions 53.0 3. State Employee Health Benefits 46.9 4. Retired State Employee Health Service 16.4

Total 399.2$

Payroll And Benefit Increased Costs As A Percent Of Allowable Capped Growth 89.7%

(1) Exclusive of current expense appropriations; includes HigherEd Personal Services, RSA wage items, and non- ERIP accruals

46

2005 STATE RETIREMENT SYSTEM STATISTICS

STATE EMPLOYEE AND TEACHERS’ SYSTEM COMBINED

Actuarial Funding Unfunded Liability

Rank State Ratio (in millions)

1 North Carolina 108.1% - $3,555.7

2 Florida 107.3% - $7,621.9

3 Delaware 101.6% - $87.3

4 Tennessee 101.5% - $360.2

5 Georgia 100.0% - $9.6

46 Illinois 60.5% $37,799.9

47 Rhode Island 59.4% $3,785.6

48 Connecticut 59.1% $12,693.7

49 Oklahoma 57.3% $9,224.5

50 West Virginia 47.1% $5,658.3

Mean 82.5%

Median 83.9%

Source: National Association of State Retirement Administrators

Public Fund Survey for FY 2005.

47

OTHER POST EMPLOYMENT BENEFITS

• The Governmental Accounting Standards Board (GASB) requires large employers, such as the State of Connecticut, to quantify the amount of non-pension retirement benefits offered to employees beginning in fiscal year 2008

• Connecticut’s substantial health benefit package results in a significant unfunded liability. Preliminary estimates of this unfunded liability are most likely to exceed the liabilities of the unfunded liabilities of SERS and TERS combined

• Connecticut’s unfunded liability may place the state at a disadvantage relative to other states that have a much lower unfunded liability or have undertaken a plan to address such shortfalls

• Connecticut will also have to quantify the amount of non-pension retirement benefits offered for Teachers

• Estimated medical and dental actuarial accrued liability ranges from $8.4 billion (advance-funded basis) to $21.1 billion (unfunded basis)

• Other Post Employment Benefits for State employees are governed by an agreement with the State Employees Bargaining Agent Coalition (SEBAC) on pension and healthcare benefits that extends to 2017; changes can occur only if the State and SEBAC agree to reopen the agreement, or via arbitration

48

RISING ENERGY COSTS

(1) Final FY2006 expenditures are not yet available; the amounts shown above may not agree with official figures to be published in the Comptroller's Annual Report

(2) Includes $4,425,000 in unpaid bills attributable to FY2005 operations

(3) Figures from agency FY2007 - FY2009 Current Service Budget Requests

(4) $10M available in OPM Energy Contingency account to meet agency needs

GENERAL & SPECIAL TRANSPORTATION FUNDS(IN MILLIONS)

49

SUMMARYSUMMARY

50

SUMMARY• The state is projected to experience a surplus at the end of FY2006-07.

• Projected spending will exceed available room under the expenditure cap in fiscal years 2007-08 and forward if spending is left unchecked.

• Beginning in fiscal year 2007-08 the state will experience significant deficits if spending remains unchecked.

• Debt service as a percent of budget expenditures will continue to grow despite maintaining general obligation allocations and issuances fixed at the current level.

• In order to achieve a significant reduction in debt service as a percent of budget expenditures, reductions in bond issuances would be required.

• Energy costs have risen almost 100% between FY 2000 and FY2007.

• Major issues and trends impacting the state’s fiscal situation include: Pharmacy costs, personnel costs, retirement benefits, expenditures related to the Department of Children and Families, the Department of Correction, Department of Education, and Department of Mental Retardation.

• The state faces significant long-term obligations including debt, unfunded pension liabilities and unfunded post-employment retirement benefits.

• The ability of the State to deal with unfunded liabilities will become increasingly difficult due to a “demographic deficit” – CT’s median age increases 10% through 2030, with significant growth in age groups over 65.