Our friend Phil at Phil’s Stock World reports…
According to its Comptroller, CT will be down to a week’s worth of cash unless it issues $520M in debt by Fall.
If the planned offering of general bond obligations is delayed until 2011, “This coming fall the state would likely have just over a week’s worth of expenses in the bank — a level lower than advisable,” Napier wrote in an August 13 letter that is posted on her website. “Conceivably, the State may run out of funds for capital expenses that have already been authorized, allocated and incurred, such as school construction projects,” she added. So before the end of the year, Connecticut expects to offer the $520 million of general obligations and as much as $600 million of special tax obligations, which would raise money for transportation. Both issues likely would be offered via negotiation.
Should we be surprised? Only if we have had our heads in the sand for the past two years. Should we be concerned? Not in the grand scheme of things, as people do seem to be willing to buy these bonds and CT has already approved $581M in borrowings – this is just an issue of timing but those of us who have seen businesses fail before (and I have been asked to consult on many BKs) are well aware of the signs of a flailing business gasping for breath and “emergency” notes from the CFO to the board of directors that contain distancing language like “I have endeavored to respond fully to those questions” are never a good sign.
Nothing against Ms. Nappier, kudos to her for being proactive here, especially as she is placing herself at odds with Representative Vince Candelora, who has been trying to make a name for himself as a fiscal conservative and fighting the bond issue. Why does Connecticut matter to my readers in Berlin? Because this is the drama that is being played out in all 50 US states and it’s $500M here and $2Bn there and, before you know it, you’re talking real money and that money is tied to jobs and those jobs are tied to state tax revenues and national unemployment and small business outlooks, etc.
Brett again. Welcome to the club, Connecticut! Gotta love these “closet debtor states” who are quietly emerging as being basically insolvent (I see you, Illinois!) Kind of like the nerdy, quiet girl in high school who turns out to be a complete sex fiend. Keep ’em coming!
More from Debtor Nation:
- A cool, interactive chart of state budget gaps
- Arnold puts 200,000 California state employees on minimum wage