Fitch Ratings dropped Connecticut’s general obligation bond outlook to “negative” from “stable” in a July 2 review, while maintaining the state’s AA rating.
“The negative outlook reflects the state’s reduced fiscal flexibility at a time of lingering economic and revenue uncertainty,” Fitch stated in its explanation of the lower outlook.
Analysts attributed the shift to the state’s high debt burden and provisions of its current budget that delay the repayment of outstanding debt, combined with its depleted reserve funds.
“The enacted budget for the new biennium delays repayment of deficit borrowing, adds to an already high debt load and fails to rebuild the state’s financial cushion,” the report stated.
Moody’s has maintained its Aa3 rating for Connecticut’s general obligation bonds at a stable outlook, and Standard & Poor’s likewise has not changed its AA rating and stable outlook for the state’s bonds.
“I am pleased to see that our double-A ratings have all been retained by the major rating agencies,” said Ben Barnes, budget director for Gov. Dannel P. Malloy, said yesterday in a statement. “Fitch”™s concerns about our vulnerability to continued economic weakness are reasonable, but ultimately not so great as to change our high-quality rating. They have affirmed that our revenue forecasts are reasonable, that our budget is balanced, and that our bonds continue to be an extremely safe investment in line with our AA rating.”
However, John McKinney, a Fairfield Republican and minority leader of the state Senate, accused the Malloy administration of looking at Connecticut’s fiscal state “through rose-colored glasses.”
“The facts speak for themselves. Connecticut”™s bond ratings are worse than they were when Governor Malloy took office, they have not recovered, and they are heading in the wrong direction,” McKinney said in a statement.
