Moody’s Investors Service downgraded its rating of Connecticut’s general obligation debt to A1 from Aa3. Moody’s also downgraded its outstanding ratings on the state’s special tax obligation senior and subordinate lien bonds to A1 from Aa3, while the ratings on the state-supported child care revenue bonds requiring appropriation for debt service payments were downgraded to A2 from A1.
“The downgrades reflect continuing erosion of Connecticut’s finances, evidenced by the pending elimination of its rainy day fund, growing budget gaps and rising debt levels,” said Moody’s in a statement. “The pressures created by growing fixed costs, coupled with weak economic performance, are unlikely to relent and will raise the risk of credit-negative actions such as deficit borrowing or backloaded financings. The affirmation of the A1 Connecticut Development Authority’s economic development bonds reflects a change in our assessment of the strength of the state’s guarantee of the bonds.”
However, there was some good news: Moody’s affirmed the A1 rating on economic development bonds issued by the Connecticut Development Authority and the VMIG 1 on the state’s General Obligation Bonds, 2016 Series C bonds. And Moody’s outlook on Connecticut was revised to stable from negative.