FOR THE FISCAL YEAR ENDED JUNE 30, 2020

Independent Auditor OpinionsAs a Connecticut Constitutional Officer, the State Comptroller is responsible for setting state-wideaccounting practices. Ultimate responsibility for the accuracy, completeness, and fairness of datapresented in this Comprehensive Annual Financial Report, including all disclosures, rests with theState of Connecticut and my office. Connecticut statutes require an annual audit of the state’s basicfinancial statements. These include statements prepared on the budgetary basis of accounting aswell as statements prepared using full GAAP standards. The state is also required to undergo anannual “single audit” for reporting to the federal government. To meet all these requirements,the State Auditors of Public Accounts have examined our financial statements and theappropriate supporting documentation.The State auditors gave the Comprehensive Annual Financial Report for the State ofConnecticut a “clean” opinion indicating they can state, without reservation, that the financialstatements are fairly presented in all material respects in conformity with GAAP.Profile of the Government and its SafeguardsThe Nutmeg StateConnecticut became the fifth state of the United States on January 9, 1788. Its bordersencompass 5,009 square miles. Within its boundaries, Connecticut has forested hills, urbanskylines, shoreline beaches, and historic village greens. Connecticut is a thriving center ofbusiness as well as a vacation location. It is both a New England State, and suburban to NewYork City. The population of Connecticut was 3,557,006 according to the July 1, 2020 estimateof the U.S. Census Bureau. Five large cities, Bridgeport, New Haven, Stamford, Hartford (theState Capitol since 1875), and Waterbury, have populations of more than 100,000 residents.State GovernmentSeparation-of-Powers provisions of the State Constitution established the three branches ofstate government: executive, legislative and judicial. The executive branch, which isresponsible for enforcing state laws, consists of six state executive officers: Governor,Lieutenant Governor, Treasurer, Comptroller, Secretary of State and Attorney General. All areelected to four-year terms.Connecticut’s General Assembly or legislative branch is responsible for creating new laws andconsists of a Senate and a House of Representatives. There are currently 36 State Senators and 151State Representatives. Members of the General Assembly are elected to two-year terms.Connecticut also elects two U.S. Senators and five U.S. Representatives.The Judicial Branch is responsible for interpreting and upholding our laws as consistent with theState Constitution and legal precedence. The Judicial Branch consists of three levels: TheSupreme Court, the Appellate Court and, at the lowest level, the Superior Court which is furtherdivided by state law into Civil, Criminal, Housing and Family Divisions. Judges of theSupreme Court, the Appellate Court and the Superior Court are nominated by the Governorfrom a list of candidates submitted by the Judicial Selection Commission and are confirmed bythe General Assembly. They serve eight-year terms and are eligible for reappointment.5

The Reporting EntityThe State of Connecticut financial reporting entity includes all the funds of the primarygovernment and of its component units. The primary government includes all funds, agencies,departments, bureaus, commissions, and component units that are considered an integral part ofthe state’s legal entity. Component units are legally separate entities for which the primarygovernment is financially accountable. Note 1 of this report contains detailed information on thereporting entity.Internal ControlsOur state’s internal control structure has been established to ensure that the assets of thegovernment are protected from loss, theft, or misuse, and to ensure that adequate accounting dataare compiled to allow for the preparation of financial statements in accordance with GAAP andstate legal requirements. The internal control structure is designed to provide reasonable, but notabsolute, assurance that these objectives are met. The concept of reasonable assurance recognizesthat: (1) the cost of a control should not exceed the benefits likely to be derived, and (2) thevaluation of costs and benefits requires estimates and judgments by management.Budgetary ControlsThe State Legislature prepares a two-year budget that contains estimates of revenues andexpenditures for the ensuing two fiscal years. This budget is the result of negotiations between theGovernor and the Legislature. Adjustments, in the form of budget revisions, executive orders, andfinancial legislation agreed to by the Governor and the Legislature, are made to the annualappropriations throughout the fiscal year. Budgetary controls are maintained at the individualappropriation account level by agency and fund established in authorized appropriation bills. Theobjective of these controls is to ensure compliance with state laws embodied in the appropriations.The State Comptroller is statutorily responsible for control structures to safeguard revenues duethe primary government, to determine the amount equitably due with respect to claims made andto ensure such expenditures are compliant with an appropriation contained in the budget for suchpurpose.Budgeted appropriations are the expenditure authorizations that allow state agencies to purchaseor create liabilities for goods and services. Before an agency can utilize funds appropriated for aparticular purpose, such funds must be allotted for the specific purpose by the Governor andencumbered by the Comptroller upon request by the agency. Such funds can then be expended bythe Treasurer only upon a warrant, draft or order of the Comptroller drawn at the request of theresponsible agency. The allotment process, which includes limits on the power of the Governorto modify appropriations, preserves expenditure controls over special revenue, enterprise, andinternal service funds and capital projects that are not budgeted as part of the annual appropriationact as revised.The Spending CapIn November 1992, electors approved an amendment to the State Constitution providing that theamount of budgeted expenditures authorized for any fiscal year shall not exceed the estimated6

amount of revenue for such fiscal year. This amendment thus provided a framework for placing acap on budgeted appropriations.The spending cap limits growth in general budget expenditures to the average five-year increasein personal income or the increase in inflation, whichever is greater. Public Act 17-2, June SpecialSession clarified certain definitions included in the spending cap language. For example, increasein personal income is defined as the compound annual growth rate of personal income in the stateover the preceding five calendar years. Increase in inflation is defined as the increase in theConsumer Price Index for urban consumers, all items less food and energy, during the precedingcalendar year.Certain types of expenditures are excluded from the spending cap. These include debt service,deposits to the BRF, and expenditures from federal funds. In addition, federally mandated or courtordered expenditures and expenditures for federal programs for which the state receives matchingfunds are excluded for the first fiscal year in which they are authorized. Afterwards, they must beconsidered general budget expenditures for purposes of determining the following year's limit.Finally, payment of unfunded liability for certain state retirement plans (except for teachers) isexempt through FY 2022. Payment of unfunded liability for the Teachers’ Retirement System isexempt from the spending cap through FY 2026. The spending cap can be lifted if the Governordeclares the existence of extraordinary circumstances and the General Assembly by three-fifthsvote approves appropriations above the cap.Economic Condition and OutlookDuring the first half of the fiscal year, Connecticut’s economy grew, but at a slower pace than theregion or the nation. For Real Gross Domestic Product (GDP) in the fourth quarter of 2019, asmeasured by the Bureau of Economic Analysis (BEA), Connecticut’s seasonally adjusted annualgrowth rate was 0.9 percent, which ranked 44th in the nation. This was only half of the NewEngland regional average of 1.8 percent and further below the national average of 2.1 percent forthe period.In terms of employment, prior to March 2020, Connecticut was experiencing modest, but steadyjob growth. According to the state Department of Labor (DOL), Connecticut achieved six straightmonths of employment growth through February 2020. However, with the advent of thecoronavirus pandemic and related non-essential business closures, the state and the nation beganto suffer historic levels of job losses not seen since the Great Depression of the 1930s. In April2020, Connecticut lost a total of 266,300 net jobs, a 15.9 percent decline in just one month. ByMay 2020, DOL reported an average of 326,000 state residents were collecting unemploymentbenefits, compared to just under 28,000 in May of 2019.By the end of the fiscal year, Connecticut had begun recovering some of the jobs lost, butemployment levels were still down significantly on a year-over-year basis. Over the course of FY2020, the state lost 168,700 nonfarm seasonally adjusted payroll jobs (-10 percent) and had a totalof 1,513,900, employed residents as of June 2020. All major employment sectors suffered losses,but leisure & hospitality was particularly hard hit, losing more than a third of its jobs for the period.For the Connecticut housing market, Berkshire Hathaway HomeServices reported results for June2020 compared with June 2019. Sales of single-family homes dropped by 14.83 percent, with the7

median sale price increasing by 5.08 percent. Reversing a trend from preceding months, newlistings were up 10.18 percent in Connecticut. The median list price rose 6.37 percent to 299,900.Average days on the market increased 14.93 percent in June 2020 compared to the same month inthe previous year (77 days on average compared with 67 in June 2019). Since that time, theConnecticut housing market has continued to recover from the pandemic related slowdown, withstronger sales and price growth. Some of this improvement has been driven by New York Cityresidents relocating to the suburbs, including to Fairfield County, Litchfield County, and theConnecticut shoreline.After beginning FY 2021 with a projected deficit of over 2 billion, Connecticut has madesignificant progress striving for recovery amid the ongoing coronavirus pandemic. The most recentconsensus revenue forecast as of January 15, 2021 showed continued improvement in each of theState’s major tax categories. Current forecasts now show the General Fund is in balance for FY2021. This remarkable comeback is a tribute to the resilience of Connecticut’s people and thestrength of its economy. Yet our work is not complete. Too many Connecticut families continueto struggle with unemployment and are facing the combined threats of hunger, eviction, andbankruptcy. As we move forward, we have a responsibility to help those left behind.A more complete discussion of Fiscal Year 2020 economic condition and outlook is contained inthe MDA section of this report.AcknowledgementsI want to thank my staff, the State Auditors, and the agency personnel who contributed toproducing this report. I also want to thank its readers who bring meaning to the w

Joann Lacaria Thomas Deasy Thomas Rice . Claudia Martin Lucky Sagay Richard Esten . . Their efforts to contribute accurate and timely financial data for their agencies, universities, community colleges, and . was extended several times. Eventually, du