S&P Global upgrades CT’s credit rating outlook

S&P Global Ratings has improved its outlook on Connecticut’s debt from stable to positive, citing the state’s progress in reducing pension liabilities while maintaining balanced budgets and building reserves. The ratings agency said Thursday it has affirmed Connecticut’s AA- rating on its general obligation debt, meaning the action was not a credit rating upgrade. S&P said, however, that the positive outlook reflects its view there is at least a one-in-three chance it could raise the rating during the outlook period. S&P also affirmed its AA rating on Connecticut’s senior-lien special tax obligation bonds, A+ rating on appropriation-backed debt and A- rating on obligations secured by the state’s moral obligation. The improved outlook reflects Connecticut’s commitment to reducing its high unfunded pension liabilities while maintaining budgetary balance and healthy reserves, the agency said. It said it also expects the state to maintain its fiscal guardrails during the next budget cycle. Connecticut has received eight credit rating upgrades since Gov. Ned Lamont took office in 2019, according to the governor’s office. Before that, the most recent general obligation bond rating upgrade occurred in 2001. “Wall Street is clearly recognizing the hard work Connecticut has done to put our fiscal house in order,” Lamont said. State Treasurer Erick Russell said stronger credit ratings can lower borrowing costs and increase the state’s capacity to make other investments. The S&P action comes ahead of a major state bond offering planned for the week of Oct. 5. Russell said his office plans to offer $1.475 billion in general obligation bonds across four series, including $800 million in tax-exempt bonds and $300 million in taxable bonds to support economic development, school construction, municipal and nonprofit investments and other projects. The remaining bonds will refinance previously issued debt in an effort to reduce interest costs and generate debt-service savings. S&P spelled out what could lead to another ratings change. It said Connecticut could receive an upgrade if it maintains its fiscal guardrails, further reduces unfunded pension liabilities without materially increasing debt, and continues demonstrating budget stability and healthy reserves. Conversely, S&P said it could return the outlook to stable if Connecticut weakens its financial controls or reserves, loses its focus on structural budget stability, or allows debt and liabilities to rise to levels the agency considers less sustainable.