Fitch cuts outlook on Conn. bonds
HARTFORD -- A New York ratings agency cut its outlook on Connecticut bonds on Tuesday, citing high debt and a $37.6 billion budget that delays repayments.
Fitch Ratings lowered the state's outlook for general obligation debt from "stable" to "negative," while leaving intact its AA grade in anticipation of a $200 million bond sale. Hearst Corp., the publisher of this newspaper, owns a 50 percent stake in Fitch.
Three other agencies maintained their current ratings for the state, including "stable" outlooks. Moody's continued its Aa3 rating and Standard and Poor's and Kroll maintained their AA rating.
"The negative outlook reflects the state's reduced fiscal flexibility at a time of lingering economic and revenue uncertainty," a Fitch analyst wrote. "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."
Gov. Dannel P. Malloy's administration portrayed the new ratings as a positive and evidence the state is on the right fiscal track.
"I am pleased to see that our double-A ratings have all been retained by the major rating agencies," said Ben Barnes, commissioner for the Office of Policy and Management. "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."
Republican leaders in the General Assembly, however, were not impressed with the downgrade to the outlook.
"Either the Malloy administration is looking at the negative impact of their fiscal mismanagement through rose colored glasses, or they're just not being honest with the people of Connecticut," said state Senate Minority Leader John McKinney, R-Fairfield, who is considering running for governor next year.
"The facts speak for themselves. Connecticut's bond ratings are worse than they were when Gov. Malloy took office and they are heading in the wrong direction because Democrats have again passed a budget with unsustainable spending offset by one-time gimmicks and more state borrowing," McKinney said.
Barnes said the state's ratings are similar to New York, Massachusetts and Rhode Island, and better than New Jersey. He said while Connecticut's pension plan is significantly underfunded, recent changes in how annual payments are calculated will allow for significant progress toward full funding in the coming years.
"I am optimistic that continued progress on economic recovery, coupled with continued prudent management actions by the state, will lead to the prompt restoration of our stable outlook," Barnes said.
A change to a "negative" outlook, as opposed to "positive" or "stable," usually means a credit rating will remain under review for two years.
State Comptroller Kevin Lembo on Monday said the state is expected to end the 2013 fiscal year with a $235.6 million surplus when the budget is technically closed in September. Most of that surplus will go towards covering a deficit in the new state budget, Lembo said.