Moody's Investors Service downgraded the state's general obligation bond rating to Aa3 from Aa2, affecting some $14.6 billion in outstanding general obligation bonds.
"The rating downgrade is based on Connecticut's high combined fixed costs for debt service and post employment benefits relative to the state's budget; pension funded ratios that are among the lowest in the country and likely to remain well below average; and depleted reserves with slim prospects for near-term replenishment," the agency stated in its release
In addition, Moody's downgraded the state's general fund obligations to A1 from Aa3, bonds supported by a Special Capital Reserve Fund (SCRF) make-up provision to Aa3 from Aa2, and the University of Connecticut General Obligation Bonds (State Debt Service Commitment) to Aa3 from Aa2.
"The Aa3 rating with a stable outlook incorporates our expectation that Connecticut's revenue trends should improve as it emerges from the recession, and the state will maintain its new commitment to structural budget balance and addressing its negative GAAP basis unreserved undesignated General Fund balance (UUFB)," the ageny reported.
Moody's 'Wrong In Its Analysis"
But Benjamin Barnes, Gov. Dannel P. Malloy’s Secretary of the Office of Policy and Management, fired back at the news of the downgrade.
"Moody’s is wrong in its analysis of the state’s finances, and wrong to change Connecticut’s credit rating," Barnes stated in a press release today. "Connecticut has done all the right things to shore up our finances, and Moody’s has responded with a downgrade intended to satisfy their internal corporate need to deflect attention from their historic lack of credibility. "
He added that "Connecticut has always paid its debt, and remains an attractive issuer of public debt."
"Investors appreciate Connecticut’s strong income levels, conservative debt management practices, and fiscally conservative leadership," Barnes stated.
Also, Barnes noted that Moody’s — which receives approximately $170,000 per year in fees from the state for their bond rating services — is one of three agencies that rate Connecticut debt. The others, Standard & Poor’s and Fitch, continue to rate Connecticut debt as AA (equivalent to Aa2 from Moody’s.)