Moody’s Investor Services said that Gov. Dannel P.Malloy’s executive order reducing municipal aid for cities and towns is “credit negative” for local governments.
On Aug. 18, still lacking a state budget, Malloy revised his executive order to keep government operating by shifting funding for school systems and nonprofits. The plan maintains education funds for the neediest school districts, but reduces aid to 54 districts and eliminates aid entirely from 85 school districts.
Moody’s analyst Joseph Manoleas said the reason for the credit negative declaration is that Malloy’s revision reduces total aid to municipalities by $928 million, or 38 percent, from 2017 funding levels and approximately $244 million relative to the governor’s June 26 order.
Moody’s says its declaration of “credit negative” does not connote a rating or outlook change, but rather is an indicator of the impact Malloy’s action will have as one of many credit factors affecting the state.
Although the executive order is in effect, Manoleas wrote, the ultimate passage of a 2018 budget will “supercede the edict and will likely affect the amount of state aid disbursed to municipalities.” In the meantime, projected cuts will likely force municipalities to take emergency action through supplemental tax hikes or mid-year expenditure cuts, he said.
