State Treasurer Francisco Borges announced late Tuesday that, with a budget surplus confirmed for fiscal 1993, Connecticut will call over $110 million of notes issued last year under its economic recovery note program.
Benson R. Cohn, assistant treasurer for debt management, said the early redemption of the notes is a result of the state's improving economy.
In 1991, Connecticut was forced to issue a total of $965.7 million in economic recovery notes to close its growing deficit. Their maturities span from June 1992 to December 1996.
According to the assistant treasurer, $50 million of the notes matured this June, and $805.6 million will remain outstanding after the early redemption.
Mr. Borges decided to call the notes after the state comptroller confirmed an "unexpected surplus" in the state's general fund.
According to the state law under which the economic recovery notes were issued, the treasurer's office must begin calling them as soon as a surplus is available. The surplus' size is still undetermined, Mr. Cohn said.
Mr. Cohn said that at the beginning of 1992, the treasurer's office had decided it would be possible to call in as many as $200 million of the notes. The office decided to call that amount, but also to reissue $100 million of notes originally slated to mature in 1995.
"When the notes were sold [in 1991], most came due in year two, three, and five of the program," Mr. Cohn said. "By reissuing the $100 million for 1994, we were spreading out the state's debt service."
Mr. Cohn also said $100 million of notes maturing in year two were moved to mature in year four.
The notes that will be called in this round consist of $50 million of variable-rate notes due Dec. 1, 1993; $50 million of variable-rate notes due on June 1, 1994; and $10. 1 million of variable-rate notes maturing on June 1, 1993.
According to Mr. Cohn, this leaves the state with $225 million of variable-rate notes and $645.7 million of fixed-rate notes outstanding.
"The call of the bonds is a good sign for us." Mr. Cohn said. "But we must continue to present balanced budgets with no gimmicks if we want to stay on the right track.
"Part of the reason for this surplus." he added, "was due to the new state corporate tax and more federal disbursements combined with some difficult, and sometimes painful, cutbacks."
Mr. Cohn said one fund, the state pension fund, should begin to reap the rewards from Connecticut's ability to pay off its notes.
"The governor has made a real pledge to improve the size of the pension fund," Mr. Cohn said. "The sooner we can pay off these notes, the more money can go into the fund."
He said the pension fund has suffered in the last two years from the state's budgetary crisis.
Chip Ward, consultant for the state pension fund, said contributions have decreased because of that crisis.
"In 1989, the state contribution to the pension fund was $402 mil- lion," he said. "In 1992, the state will dedicate $273 million."
He added that because of the state's inability to support the fund, the total amount decreased $215 million in 1991 and $150 million this year.
The fund is also partially supported by worker contributions.
But, Mr. Ward said, the state's ability to pay off the economic recovery notes was "an encouraging sign.
In the press release from the treasurer's office announcing the redemption. Mr. Borges said that on Sept. 15 he will assess the progress of the repurchase of the notes and make any adjustments necessary. The final call for the bonds will take place on Oct. 1.
The deputy press spokesman for Gov. Lowell P. Weicker, Arthur Henick, said the governor is aware of the importance of paying off the notes as quickly as possible and is "very happy" about the surplus.