Fitch Ratings has tagged Connecticut’s long-term general obligation bonds AA+, but drawn out efforts to close the state’s budget deficit has soured the New York credit rating agency’s outlook.
Fitch said its negative outlook, which was revised from stable last Nov. 5 is a result of the state’s revenue weaknesses and spending pressures, which have widened projected budget deficits over the next few years.
Connecticut’s reliance on one-time revenues, particularly borrowing and/or securitizing more than a billion dollars in order to plug budget holes, also played a factor in the negative outlook, Fitch said.
The state’s unfunded liabilities for state employee and teacher pensions and other post-employment benefits, also weighed on Fitch’s mind.
 “Lack of significant progress in resolving large budget gaps through the current biennium and beyond, and continued reliance on borrowing for operations,” could trigger a credit downgrade, Fitch warned.
On Wednesday the state senate passed a deficit-mitigation bill that closed a nearly $400 million deficit for the current fiscal year.
The plan including postponing a $100 million payment to the state employee retirement fund, counting on additional federal revenues, using nearly $239 million originally allocated from the state’s Rainy Day fund for next year, siphoning nearly $97 million from various accounts and funds, and making nearly $90 million in spending cuts.
Now lawmakers must turn their attention to the fiscal year that begins July 1, which is estimated to be about $700 million in the red. Legislators had passed the two-year, $37.6 billion budget last September.
Fitch ratings included:
–‘AA+’ rating to $105 million in GO bonds (2010 series A);
–‘AA+’ rating to $184.25 million taxable GO bonds (2010 series A) (Build America Bonds – direct payment);
–‘F1+’ rating to $353.085 million GO bond anticipation notes (2010 series A).
