From the Moody’s website:
New York, January 20, 2012 –
Moody’s Investors Service has downgraded the State of Connecticut’s general obligation bond rating to Aa3 from Aa2, affecting approximately $14.6 billion in outstanding general obligation bonds. Concurrently, Moody’s has 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 outlook is stable, revised from negative.
You can read all the details here.
Ben Barnes, Governor Dannel Malloy’s budget czar, issued the following statement criticizing Moody’s over its decision:
Moody’s is wrong in its analysis of the state’s finances, and wrong to change Connecticut’s credit rating. 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.
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.
Moody’s lowered the rating for Connecticut below where it has been since April 2010 even though Connecticut’s fiscal health has significantly improved during that period. Recall that in 2010 Connecticut faced looming multi-billion deficits into the future, had pension funding ratios in the low 40s, had spent the entire rainy day fund, and was in the middle of a series of budgetary gimmicks which Governor Malloy has spent his first year in office undoing.
Today, we have a structurally balance budget, have converted to GAAP, have fully funded our current pension obligations and seen their funding ratio rise, have negotiated significant pension benefit concessions from organized labor, have negotiated significant employee contributions to retiree health benefits, and have begun to add jobs to the state economy.
Moody’s Investor Service decision today to lower their rating of Connecticut’s General Obligation debt from Aa2 (negative) to Aa3 (stable) is unfortunate. It reflects their continued reaction to their central involvement in the financial scandals that led to the deepest recession since the Great Depression. Coming on the eve of our budget release, without an imminent bond sale, suggests that the move is motivated by factors other than Connecticut’s creditworthiness.
UPDATE: Senate Minority Leader John McKinney, R-Fairfield issued a statement calling Barnes’ criticism “flippant, if not slanderous.”
“Moody’s downgrade is a fair and honest failing grade for the Malloy administration and Democrat legislators who have not made the necessary fiscal reforms Republicans have advocated. It is also a rebuke of the failed concession package the Governor agreed to with state employee unions, which will not yield the savings claimed by the administration and only further tie the state’s hands until 2022. Finally, it is a failing grade for the Democratically-controlled legislators who have refused all efforts to reign in the size and cost of government, address our long-term liabilities, and reform the lavish and unsustainable pension and healthcare benefits we provide our state employees,” said Senator McKinney.
“Secretary Barnes’ flippant, if not slanderous, dismissal of the Moody’s downgrade and the facts that led to it are equally troubling. Secretary Barnes should immediately back up his unsubstantiated claims or retract them. Otherwise, see this rating for what it is: a stinging indictment of the Governor’s failure to address real pension reform and clear evidence that the state has not done enough to stem the flow of red ink and secure its economic future.”