Bond Rating Agencies Affirm Stable Outlook for Connecticut

The three credit rating agencies, Standard & Poor’s (S&P), Moody’s, and Fitch reaffirmed their AA (S&P and Fitch) and Aa2 (Moody’s) ratings on $570 million of taxable and tax-exempt Connecticut general obligation (GO) bonds this fall. The agencies see a stable outlook for Connecticut based on its:

• “Substantial and diverse economic base” with strong anchors (S&P)
• High income and wealth levels 
• Stabilizing revenues 
• Conservative revenue estimating
• Active revenue monitoring and quick identification of budget shortfalls
• Absence of legal limitations on state revenue

 The main credit risks are Connecticut’s:

• History of “highly cyclical” budget performance
• Above average debt levels and unfunded pension liabilities
• Large structural budget gaps produced by “steep revenue losses combined with persistent spending pressure” (Fitch) 

Ratings of Connecticut GO bonds dated September 30, 2010 (Fitch), October 4, 2010 (S&P), and October 6, 2010 (Moody’s) are available from the Legislative Library.