Having downgraded Connecticut to an “AA-” rating in May, Standard & Poor’s (S&P) has taken another look at the state … and again doesn’t like what it sees.
In a new report, S&P evaluated the ability of the 10 states with the most tax-supported debt to respond to significant fiscal stress in the first year of a moderate recession.
It found that Connecticut’s low budget reserves, high fixed costs and overreliance on income taxes from the wealthy leave it poorly positioned should such an economic downturn occur.
Although S&P put the chances of a U.S. recession in fiscal year 2017 at 20 to 25 percent, it said that the first year of a moderate recession would cost Connecticut $1.15 billion in revenue. The state’s reserve fund currently stands at about $127 million.
In all, S&P said the 10 states evaluated — which also include California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania, Washington and Wisconsin — would see a collective revenue shortfall in a recession of more than $27 billion.