New York credit rating agency Moody’s Investors Services has revised its outlook on Connecticut’s debt to negative, raising red flags about the state’s depleted reserves, pension obligations and high levels of post employment benefits relative to the state’s overall budget.
Moody’s 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 news will raise concerns about the long-term fiscal health of the state.
In its assessment Moody’s said “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.”
And without 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.”
If the state’s credit rating was downgraded it would increase Connecticut’s cost of borrowing.
