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Hedge Funds’ Bust Breaks Wealthiest State

July 2, 2017 (EIRNS)—Connecticut, whose households have the highest median wealth in the nation, has entered a government shutdown due to a large budget shortfalls and falling total revenue. While several other state shutdowns involve governor-legislature confrontations, Connecticut’s involves the failing U.S. financial sector—specifically, hedge funds.

According to the research firm Preqin, the hedge fund sector as a whole made no profits in 2015 or 2016 (actually, profit of a couple of tenths of 1% each of those years). So hedge fund managers, large numbers of whom live in Connecticut, are not paying taxes, and their investors are certainly paying less taxes. Although it raised income tax rates dramatically in 2015, Connecticut is suffering year-to-year declines in total tax revenue.

"Despite having a per capita personal income that is more than 143% of the national average according to Moody’s, the state’s economy continues to lag,"

reported Bloomberg News June 30.

"Revenue shortfalls in the state register around $450 million for the [just ended 2017] current fiscal year alone, while estimated deficit totals are projected to clock in near $5 billion for the 2018 and 2019 fiscal years combined, according to the Connecticut Business & Industry Association. Debt outstanding levels and unfunded pension liabilities relative to revenues are among the highest of any state in the country, Moody’s Investors Service said in May."

Income tax collections in FY2017 are lower than FY2016, which has not happened since FY2009 which included the financial crash and economic collapse. The state’s rainy-day fund is exhausted. The ratings firms have downgraded Connecticut to a level better only than New Jersey and Illinois in the country.