In a letter to Republican Gov. M. Jodi Rell and legislative leaders, state Treasurer Denise Nappier today warned the continued lack of a two-year budget (the new, 2009-10 fiscal year began July 1) could jeopardize the state’s bond rating.
“We have seen that a significant delay in adopting a budget, in and of itself, can create uncertainty amongst bond investors and could adversely impact a state’s credit rating,” Nappier, a Democrat, wrote. “Earlier this week, one of the major rating agencies, Fitch, downgraded the State of Illinois by two notches from “AA-” to “A”. Fitch cited several factors as grounds for this action, among them: ‘The significant scope of the budgetary problem, … the failure of the state to enact a budget that fully addresses its current spending needs and its large structural budget deficit’.”
The bottom-line is that a lower credit-rating means higher borrowing costs for Connecticut and limits the market for the state’s bonds. Connecticut is currently rated Aa3 (excellent) by Moody’s and AA (median) by Fitch and Standard & Poor’s.
