Fixed Costs

Fixed costs are an increasing portion of the Connecticut state budget, and are expenditures the State is obligated to make. According to Connecticut’s Office of Policy and Management and the General Assembly’s Office of Fiscal Analysis, fixed costs include the State's contributions to its state employee and teacher pension systems, debt service payments on the State's prior years' bond allocations, Medicaid, and other post-employment benefits (OPEB) for retired state employees. Other post-employment benefits include: medical, dental, life insurance and prescription drug coverage for retirees.

Connecticut's fixed costs have risen from 35 percent of General Fund expenditures in fiscal year 2000 to 49 percent of General Fund expenditures in fiscal year 2017, an increase of 14 percentage points. Additionally, fixed costs have risen in terms of total dollars, from $5 billion in fiscal year 2000 to $8.7 billion in fiscal year 2017. This is a 74 percent increase in the whole-dollar amount of fixed costs.

Contributing to this increase have been the State's rising contributions to the State Employees Retirement System (SERS) and Teachers' Retirement System (TRS), as well as increases in debt service payments and Medicaid spending. Since fiscal year 2000, the State's contributions to SERS and TRS have increased by $823 million (273 percent) and $722 million (249 percent), respectively. While in fiscal year 2000 contributions to SERS and TRS accounted for 11.8 percent of Connecticut's total fixed costs, they accounted for 24.7 percent in fiscal year 2017.

Along with increased contributions to the State's pension systems, Connecticut's fixed costs have risen over the years as a result of larger debt service payments. Debt service payments are payments made to investors on bonds that have been previously issued to fund state and local building projects, equipment and information technology, and infrastructure construction. Since fiscal year 2000, debt service payments have increased from roughly $1.3 billion to $2.1 billion in fiscal year 2017 — an increase of $744 million or 56.6 percent. However, during that time period, debt service payments have gone from accounting for 26 percent in fiscal year 2000 of the State's total fixed costs to accounting for 24 percent in fiscal year 2017.

As the State's fixed costs are increasing, the amount of money available for the discretionary — or non-fixed — portion of Connecticut's General Fund is shrinking. As a result, from fiscal year 2000 to fiscal year 2017 Connecticut's non-fixed costs declined by $210 million or 2.3 percent.

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