As Connecticut seeks to close a $1.6 billion budget shortfall after unions rejected a proposed concessions package, Moody’s lowered its outlook for the state’s bond rating.The rating agency said the state’s growing pension obligations and the near-depletion of its rainy-day fund, justified the new guidance.
Moody’s downgraded the state’s rating from Aa3 to Aa2 last year, after the state instituted a plan to borrow money for current operating expenditures and used up most of the emergency fund.
According to a report released earlier this month, Connecticut’s pension obligations are less than 50 per cent funded.
The full statement from Moody’s is below, via the WSJ:
Moody’s Investors Service has revised the outlook on the State of Connecticut’s general obligation bond rating to negative from stable and affirmed the Aa2 rating. The state has approximately $14 billion in outstanding general obligation bonds.
The negative outlook reflects Connecticut’s depleted reserves with slim prospects for near-term replenishment; pension funded ratios that are among the lowest in the country and likely to remain well below average; and high combined fixed costs for debt service and post employment benefits relative to the state’s budget. In the absence of a clearly articulated plan to achieve meaningful improvement in the state’s pension funded ratios and reduce its fixed costs, as well as progress toward adequate reserve levels, Connecticut’s rating could be downgraded.
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