It’s taken about 22 years, but Connecticut has done it. The state on Wednesday received its first bond rating upgrade since 1998.
Major ratings agency Moody’s upgraded its creditworthiness score on Connecticut’s $16 billion worth of outstanding general obligation debt, raising it from ‘A1’ to ‘Aa3,’ with a stable outlook.
The upgrade could give bond buyers more confidence, leading to lower borrowing costs in the future.
Moody’s cited state policies that have “already borne fruit in the accumulation of significant budgetary reserves and good financial performance through the [COVID-19] pandemic.”
The state’s reserves, including its more than $3 billion rainy day fund, “are critical in mitigating budgetary inflexibility created by the state’s heavy debt and retiree benefit liabilities, which are among the highest of the states,” Moody’s said Wednesday.
The fiscal policies that have led to the buildup of reserves reduce the impacts of revenue volatility, promote more robust funding of the public employee pension system and lead to better budget management, the firm added.
Moody’s also noted Connecticut’s oft-cited high income and wealth levels as a plus, offset by its lagging economy and consecutive years of population loss.
Moody’s previously rated Connecticut’s G.O. debt at ‘Aa3,’ but downgraded it to ‘A1’ in 2017, where it sat until this week.
State Treasurer Shawn Wooden called the upgrade “exceptional news for Connecticut,” saying it “sends a clear signal that its improved long-term financial sustainability will contribute towards a strong economic recovery.”
“Connecticut will now have the ability to access funding for critical infrastructure investments at even more attractive interest rates which will strengthen our economic recovery and save taxpayer dollars in the long-term,” Wooden said in a statement.
Wooden and Office of Policy and Management Secretary Melissa McCaw presented to the major rating agencies several months ago.
No other agency has yet taken action on the state’s rating, but Wooden said he hopes they will soon.
