Senator McKinney’s Statement on Moody’s Downgrade of Connecticut’s General Obligation Bond Rating

Hartford, CT – Moody’s Investors Service today downgraded the State of Connecticut’s general obligation bond rating to Aa3 from Aa2. Senate Minority Leader John McKinney (R-Fairfield) released the following statement:

“Moody’s downgrade is a fair and honest failing grade for the Malloy administration and Democrat legislators who have not made the necessary fiscal reforms Republicans have advocated. It is also a rebuke of the failed concession package the Governor agreed to with state employee unions, which will not yield the savings claimed by the administration and only further tie the state’s hands until 2022. Finally, it is a failing grade for the Democratically-controlled legislators who have refused all efforts to reign in the size and cost of government, address our long-term liabilities, and reform the lavish and unsustainable pension and healthcare benefits we provide our state employees,” said Senator McKinney.

“Secretary Barnes’ flippant, if not slanderous, dismissal of the Moody’s downgrade and the facts that led to it are equally troubling. Secretary Barnes should immediately back up his unsubstantiated claims or retract them. Otherwise, see this rating for what it is: a stinging indictment of the Governor’s failure to address real pension reform and clear evidence that the state has not done enough to stem the flow of red ink and secure its economic future.”

In its summary Moody’s said:

The rating downgrade is based on Connecticut’s high combined fixed costs for debt service and post employment benefits relative to the state’s budget; pension funded ratios that are among the lowest in the country and likely to remain well below average; and depleted reserves with slim prospects for near-term replenishment. Connecticut’s state employees retirement system (SERS) and teachers retirement system (TRS) had funded ratios of 44% and 61%, respectively, as of June 30, 2010. The state has committed to paying the full actuarially determined annual required contribution (ARC) for both systems, and some pension and healthcare reforms were achieved in last year’s round of union negotiations. A new valuation is expected to be published soon incorporating the reform measures. However, funded ratios are not likely to improve significantly until closer to the end of the remaining amortization periods — 21 years for SERS and 25 years for TRS. Connecticut’s combined fixed costs for debt service, pension, and other post employment benefits (OPEB) are already high and, absent significant further reforms, will continue to consume an increasingly larger portion of the state’s budget.