Category Archives: Public finance

Cities Must ‘Get Their Act Together,’ Malloy Says

by Categorized: Economic Development, Politics, Public finance Date:

Gov. Dannel P. Malloy, standing in front of a bank of Rentschler Field upper-level windows overlooking Hartford and East Hartford, recounted his achievements to a roomful of local and regional economic development officials Wednesday — but added a blunt twist.

Malloy at Rentschler Field Wednesday Dan Haar/the Hartford Courant April 23, 2014

Malloy at Rentschler Field Wednesday
Dan Haar/the Hartford Courant April 23, 2014

When someone asked the governor about struggling cities, he didn’t just cite all the money his administration has spent, and will spend.

“Cities have to get their act together,” said Malloy, who’s seeking re-election this year. “I did this for 14 years.”

Malloy had a somewhat easier time of it as Stamford’s mayor, since that city, alone among the Big 5 of Bridgeport, Stamford, Hartford, New Haven and Waterbury, has a vast, stable base of rich and upper-middle-class neighborhoods, not to mention Wall Street firms.

But as governor, even his critics must admit he’s had some success bringing a bit of efficiency to entrenched agencies.

“We have more than 1,000 fewer people working in state government than the day I came in,” Malloy told the gathering, organized by the state Department of Economic and Community Development. “But some of this has to be done at the local level.”

Was he suggesting staff cuts at cities and towns? No, at least not right away. Rather, he’s calling on them to find ways to be more efficient through technology and management — and therefore less dependent on the state and able to operate with fewer people.

Hartford Mayor Pedro Segarra proposed a budget this week with deep cuts and perhaps layoffs. Without referring to that, Malloy said, “I can look you in the eye and say I am not responsible for a single layoff at a municipality,” as state aid to cities and towns has remained stable.


State’s Obamacare Exchange Beats Goal, Ranks High In CNBC Efficiency Rating

by Categorized: Health Care, marketing, Public finance Date:

Connecticut’s health exchange enrolled nearly 200,000 people between Oct. 1 and the deadline Monday — and the number will rise as people who eked into the system by March 31 finish their applications.

Here is the final tally from Access Health CT:

Total Enrollment: 197,878

Total Enrolled On March 31:  5,917

Private Plans: 76,597 (informal goal: 70,000)

Medicaid Enrollees: 121,281 (informal goal: 30,000)

Website Visitors Since Oct. 1: 801,509

Call Center Queries: 366,975

Enrollment Fairs: 78

Anyone who left a voicemail message or appeared at one of the state’s two storefront locations but did not complete an application will have a chance to do so by May 1 and still meet the federal deadline for a 2014 subsidy.

Maryland to use Connecticut system. Click here for story.

The last-day rush at Access Health CT's New Britain storefront Monday.  Matthew Sturdevant/The Hartford Courant

The last-day rush at Access Health CT’s New Britain storefront Monday.
Matthew Sturdevant/The Hartford Courant looked at the 14 states plus Washington DC that ran their own exchanges, using federal grant money. California was the most efficient, signing up 1 million people in private plans after receiving $1.07 billion from the feds, for an average cost of $1,046 for every person who signed up for a private plan.

Hawaii was the most expensive, coming in at $35,749 per private-plan enrollee. Obviously, as one commenter pointed out on the CNBC website, bigger states have an efficiency advantage because building a system of any size costs a lot.

Connecticut was more efficient than any small state at $2,552 per enrollee, making us the fifth most efficient state overall.  (Figures did not include the huge last-day rush in Connecticut and elsewhere, which lowered the per-enrollee cost.)

The average cost per enrollee in all of the state-run exchanges was $1,899 — a figure that was brought way down by the size and efficiency of California.

It’s notable that Connecticut barely beat its own informal goal of enrolling 70,000 people in private plans, but crushed its target of 30,000 Medicaid enrollees.  As it turned out, expanded Medicaid brought a much bigger pool than private uninsured residents.

And, said Kevin Counihan, the Access Health CT CEO, Connecticut made a smart decision early on to keep its system simple rather than tying it into the state’s systems for food stamps, temporary welfare payments and other social services. States that failed had more complex databases, he said.

Tallying just the cost of private plan enrollment makes sense if we’re trying to gauge the core goal of Obamacare, but, as Counihan points out, by ignoring Medicaid enrollment it misses the source of the biggest reduction in the ranks of the uninsured.

Any way we look at it, as the final numbers come in, the average cost per person will fall. And future years will cost a whole lot less now that the systems are up and running. That’s the hope, at least.  But remember, the exchanges will have to start charging a tax to operate after 2015.

Bill Would Require Labor Breakdown For Companies Receiving Big State Aid

by Categorized: Economic Development, Government, Labor, Politics, Public finance Date:

State taxpayers want to get their money’s worth when they give a company a huge aid package, and to that end, many lawmakers want to add a new hurdle.

Any firm that gets at least $10 million in state assistance would have to file a report showing how it intends to favor Connecticut-based contractors for any construction work covered by the aid, under a bill that advanced Thursday in the legislature.

The firms would also have to report on the names of construction contractors, the total number of full-time construction employees on the site and the wages paid, and the total number of construction workers on the project who live in Connecticut.

“We want to see more Connecticut construction jobs as a result of these state investments,” said state Sen. Gary D. LeBeau, co-chairman of the legislature’s Commerce Committee, which advanced the bill to the Senate floor in a 12-5 vote.

The bill is part of a long debate over how much the state should demand of the companies it backs with economic development aid. Unions support the bill and the Connecticut Business and Industry Association opposes it, saying it’s onerous.

Gov. Dannel P. Malloy’s development commissioner, Catherine H. Smith, told lawmakers she’s concerned the bill “may dissuade some larger companies from considering the state.

The administration’s caution is probably wise. Promoting local jobs is great but we wouldn’t want other states to shut out Connecticut-based construction workers. And when it comes to new business regulations, Connecticut is on the watch list — so we should pass up even some decent ideas, for the greater good.

CT Hospitals: 1,400 Jobs Cut, $175M Income Decline In 2013

by Categorized: Health Care, Public finance Date:

The state’s 30 acute care hospitals have shed 1,400 jobs in the last year and their operating income was down by $175 million in 2013 compared with the year before, the Connecticut Hospital Association said.

The dire report, ahead of official filings, is aimed at lawmakers and Gov. Dannel P. Malloy as the association works to repeal a tax that it says is hurting the public by forcing cutbacks in services.

“Hospitals have done extraordinary things to minimize the impact of the tax on hospital patients.  But it is very challenging,” the Wallingford-based association said in a written release, which also said the hospitals have “reduced staff salaries and benefits.”

The association didn’t break down where the 1,400 job cuts happened. A report from the association last month claimed the hospitals directly employ 55,000 people and account for 9 percent of the state’s economy directly and indirectly.

Click here for my blog post about the hospitals’ economic impact.

The association said its 2013 woes are due to three main factors: A 2 percent cut in Medicare funding, part of the federal sequestration; a $103 million, one-time cut in state funding in the first half of 2013, part of Malloy’s emergency budget balancing efforts; and sharp cuts in state reimbursement for a tax that was enacted as a way of attracting more federal dollars.

The tax is the main issue in dispute. The hospitals pay a state tax totaling about $350 million a year, and in previous years, received all of it back in reimbursement. Starting this fiscal year, the reimbursement was down by $101 million, and it will be town by $235 million a year starting July 1, the association said.

Lawmakers are debating a bill to phase out the tax over five years — a phaseout that was not in Malloy’s budget.

“Phasing out the tax will protect patient care, save jobs, and reduce the cost of healthcare for the people of Connecticut,” the association said.

The Malloy administration disagrees, saying the hospitals will receive $1.7 billion this year from the state, the same amount as last year and $400 million higher than just three years ago. Some people in the administration also point to high salaries for hospital CEOs and other executives.

In October, the hospitals reported improved financial condition for the 2012-13 fiscal year, with operating surpluses totaling $513 million in fiscal 2013, up sharply from the prior year.  Five hospitals showed deficits from operations, down from eight in 2011.

The deterioration is happening despite the flat funding, the association said, in part because of rising Medicaid services in addition to Medicare cuts. The association did not release a breakdown of employment changes by hospital, though many of the hospitals have announced layoffs and cutbacks.


Hospitals Fire Back At Malloy: We Are 9 Percent Of CT Economy

by Categorized: Economy, Health Care, Jobs, Public finance Date:

Fresh from another snub by Gov. Dannel P. Malloy, the Connecticut Hospital Association is waving around a new report that claims its member hospitals account for nearly 9 percent of all economic activity in the state, and that every dollar the state gives them brings $2.33 from the federal government.

The first statement seems hard to believe, though without question hospitals are a huge part any region’s economy, especially the hard-hit cities.  The second statement about federal reimbursement is not exactly true but isn’t always wrong.

The hospital association’s report says the hospitals employ 55,000 people directly, with a direct payroll of $5.3 billion, or $96,000 per job. By spending money in the community, those employees indirectly create another 56,000 jobs for a total of 111,000 jobs, and $11 billion in payroll.

Separately, the hospitals themselves buy goods and services that directly or indirectly create another $8.1 billion in activity, and they spend another $530 million on buildings and other capital projects which multiplies to $1.1 billion in the economy, the report said.

Grand total: $20.2 billion in a state economy that’s $235 billion a year.

That’s a rebuke to Malloy, who, the hospital association says, shorted the hospitals by just over $500 million in Medicaid reimbursements and other costs last spring that they said they would need to keep providing the same level of services.

Then, when Malloy’s budget chief, Ben Barnes, was asked by reporters on opening day at the Capitol last week whether there was anything for hospitals in this year’s proposal, he said simply, “No.”  When pressed, he said he had looked at the state filings and thought the hospitals were doing fine.

They of course disagree.

As for the $20.2 billion, we see a handful of these economic output reports from industries, and this one seems to push toward the high side. For example, I know there are formulas to get there but it’s still not clear to me how a group of employees with $5.3 billion in their pockets can give rise to another group of people who earn $5.7 billion.

Yes, we are all connected in the economy.

And as for the federal reimbursement, the hospital association appears to be referring to the Medicaid formula when it says the federal “match rate” is 70/30. That means for every additional dollar we spend on Medicaid, we get $2.33 back.

But Malloy and Barnes say their plan did not cut back on Medicaid spending, only on the amount the hospitals wanted to receive from the state. They say the $1.7 billion for hospitals is actually up slightly, but of course the hospitals argue that Medicaid spending is up more than slightly.

To be continued this spring at a state Capitol near you.

State Pension Fund Gains $2.9B In 2013, Even After Payouts

by Categorized: Public finance, Wall Street Date:

The political debate over Connecticut’s long-term health and pension liabilities just got more complicated, as the state’s pension and trust funds grew by $3 billion in 2013 to $28.2 billion, a record.

The gain was after paying out $636 million in benefits and expenses, state Treasurer Denise L. Nappier reported.

Stock market gains in the United States and overseas led to investment gains of 14 percent in both the Teachers Retirement Fund and the State Employees’ Retirement Fund, the largest of six pension plans and nine trust funds managed by Nappier.

That sounds great and it did match the benchmarks that Nappier uses to gauge the funds’ performance, but it was far less than the 29 percent return on the Standard & Poor’s index of 500 large U.S. stock companies. Of course, the whole idea is to balance the portfolio, to guard against big swings in stocks, real estate and various classes of debt securities.

Most important, the returns of 14 percent beat the state’s investment assumptions, which ranged from 8 percent to 8.5 percent.  In all, the funds have grown by $8 billion, or 40 percent, since the end of the recession in mid-2009.

If the gains lead to higher assumptions about returns, that could dramatically lower the state’s estimate of unfunded liabilities.  Gov. Dannel P. Malloy recently said the state’s long-term obligations were down by $11.6 billion to $64.6 billion — the source of much debate at the state Capitol.

Gov. Dannel P. Malloy and his GOP challengers, Sen. John McKinney and Tom Foley, have argued about “debt” and “long-term obligations,” not always clearly, making the debate needlessly more complicated.

Debt is money the state has borrowed and must pay back in a regular schedule, like a mortgage. The state’s debt costs are higher under Malloy, but not much higher in part because more borrowing has been offset by retirement of old debt and lower interest rates.

Long-term obligations are the estimated billions of dollars in future payouts the state will have to make for retirement.

Malloy has increased yearly payments into the funds as a way of chipping away at a projected shortfall, but the fund’s investment returns are far more important than any money the state can afford to kick in from year to year.


State Names Board For Bioscience Fund

by Categorized: Economic Development, Health Care, Public finance, Technology Date:

The state’s newly created, $200 million Bioscience Innovation Fund now has an advisory committee filled with some of Connecticut’s high-powered figures in the field.

The fund, overseen by Connecticut Innovations, the state’s quasi-public technology investment and assistance arm, was created by the governor and legislature earlier this year as a way to target drug development projects and other bioscience innovations, at firms or universities, with public money that could also attract private investment.

Chairing the committee is Claire Leonardi, CEO of Connecticut Innovations.

The board, with members appointed by Gov. Dannel P. Malloy or legislative leaders, includes Peter Farina, Ph.D., executive in residence at Canaan Partners; Steven Hanks, M.D., vice president of medical affairs for the central region at Hartford HealthCare; Joseph Kaliko, CEO of Gaming Innovations International; Marc Lalande, Ph.D., chairman of the Department of Genetics and Developmental Biology, and head of genomics and personalized medicine programs at UConn; William LaRochelle, Ph.D., an executive at Roche 454 Sequencing Solutions International; Charles Lee, Ph.D., scientific director at The Jackson Laboratory;  Alan Mendelson, general partner of Axiom Venture Partners; Edmund Pezalla, M.D., national medical director for pharmaceutical policy at Aetna; Carolyn Slayman, Ph.D., professor of genetics and cellular and molecular physiology and deputy dean at Yale School of Medicine; and Eleanor Tandler, founder and CEO of Novatract Surgical.

Jewel Mullen, M.D., the state’s public health commissioner, and Catherine Smith, commissioner of economic and community development, are ex-officio members with voting rights. The fund is run by Jeremy Crisp, Ph.D., the CI executive vice president and chief innovation officer.

The fund, to be disbursed over 10 years to projects that show commercial promise, is scheduled to award $10 million the first two years, $15 million for the third and fourth years, and $25 million in years five through 10.




As Fed Scales Back Stimulus, New England Prez Objects

by Categorized: Economy, Public finance Date:

It had to happen eventually, and on Wednesday afternoon the Federal Reserve’s policy-setting board, the Open Market Committee, declared  it would scale back monthly purchases of mortgage-backed securities by $5 billion and long-term Treasury bonds by another $5 billion.

That cuts the monthly stimulus to $75 billion from $85 billion, and it could send mortgage rates and other long-term interest rates higher. It could be seen as good news that the Fed sees conditions improving well enough to take the action.

Stock markets reacted favorably with a sharp, 150-point rise in the Dow, either because investors expected an even larger cut or, more likely, because the Fed promised to keep short-term rates near zero until  “well past the time that the unemployment rate declines below 6-1/2 percent.”

Eric Rosengren, Boston Fed president AP photo

Eric Rosengren, Boston Fed president
AP photo

All committee members voted for the action except one: Eric S. Rosengren, president of the Federal Reserve Bank of Boston. As our New England rep on the board, the arch liberal inflation dove has been the most outspoken Fed official when it comes to keeping the pedal to the metal. Now that fellow dove Janet Yellen is the chairwoman-in-waiting, she’ll take a more centrist approach and Rosengren will represent the interests of the 99 percent from Boston.

From the Fed’s statement issued minutes ago:

Voting against the action was Eric S. Rosengren, who believes that, with the unemployment rate still elevated and the inflation rate well below the target, changes in the purchase program are premature until incoming data more clearly indicate that economic growth is likely to be sustained above its potential rate.

Rosengren sees what a lot of us see: A labor market that’s not working for most people, even if it is creating jobs. If the jobs are low-wage and lower-paying than the ones people lost, that’s creating anti-inflationary pressure, and that’s what we have in the economy right now.

Here is the key paragraph from the Fed’s statement:

Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.


State Has Another Successful Bond Sale As Rates Remain Low

by Categorized: Public finance Date:

A lot of people worry that Gov. Dannel P. Malloy’s voracious borrowing habit on behalf of the taxpayers will crash the state budget, but it hasn’t happened yet. The latest round of bond sales, announced Monday by Treasurer Denise L. Nappier, shows that happy days are still here at least when it comes to Connecticut debt.

The round of $600 million in “special tax obligation” bonds to pay for roads and other infrastructure upgrades oversold, with subscribers signing up for $734 million, Nappier’s office said. That means the yield on the 20-year issue, the interest rate, fell to 3.67 percent.

The sale included $173.4 million of sales to individual investors, mostly state residents, through the web site — the highest level of any sale in the 29-year history of special tax obligation bonds.

Hearst and Tribune Media, parent of The Courant, helped develop targeted email lists. Updike, Kelly & Spellacy and Lewis & Munday  were co-bond counsels and underwriting was led by Siebert Brandford Shank & Co.


SBA Loan Totals Show Webster On Top For 6th Year

by Categorized: Banking, Public finance Date:

The Small Business Administration loan totals in Connecticut for the fiscal year that ended Sept. 30 show Webster Bank ahead in both number of loans and dollar total, leading both categories for the sixth straight year.

In all, the Connecticut SBA office backed 572 loans totaling $227 million, a 22 percent dollar increase over fiscal 2012.  Webster’s total in the recent year was 78 loans for $34.4 million.

The totals include the so-called 504 program of loans to Certified Development Corporations; that total was $42.4 million in 70 deals.

Top Five Lenders in Fiscal 2013 by Number of Loans:

BANK Number of Loans Dollar total
Webster Bank 78 $34,439,000
First Niagara Bank 60 $30,168,000
Farmington Bank 52 $7,009,000
Wells Fargo Bank 31 $14,736,000
Thomaston Savings Bank 27 $6,004,000

“We’re starting to see, and we’ve been seeing, businesses really come out and get confident enough to come out and borrow,” said Robert J. Polito, senior vice president and director of government guaranteed lending at Webster.

Borrowers are firms “across the board,” he said. “It’s from an ice cream shop to a law firm, from a gynecologist to a plumber.”

SBA loans up to $5 million can be backed by the federal agency from 50 percent of value to 90 percent.

the list has led to some competing claims among banks. In its annual report earlier this year for 2012, Farmington Bank said: “Our success in the small business segment resulted in Farmington Bank being named the No. 1 Small Business Administration lender in the state of Connecticut for the SBA fiscal year ending 2012.”

In that fiscal year, Farmington Bank had a total of 57 regular small business loans backed by the SBA, for a total of $8.6 million.  Webster had 50 loans totaling $12.4 million.  Including the community development loans, Farmington Bank had 59 deals for a total of $10.3 million and Webster had 60, totaling $20.5 million.


BANK Number of Loans Dollar total
Webster Bank 78 $34,439,000
First Niagara Bank 60 $30,168,000
Farmington Bank 52 $7,009,000
Wells Fargo Bank 31 $14,736,000
Thomaston Savings Bank 27 $6,004,000