McKinney: “Negative Outlook for Connecticut’s Bond Rating Predictable Following Malloy’s Broken Promises and Reckless Borrowing”

Hartford, CT – Three days after Governor Dannel P. Malloy set a new record for total general obligation (G.O.) bond allocations in a calendar year, Fitch Ratings has reaffirmed its negative outlook for the state’s credit rating.

Fitch Ratings today assigned an ‘AA’ rating to $900 million in state G.O. bonds, including:

• $575 million in G.O. GAAP conversion bonds; and
• $325 million in G.O. refunding notes (economic recovery notes)

In addition, Fitch affirmed its ‘AA’ rating for $14.4 billion in outstanding Connecticut G.O. bonds, and maintained the state’s rating outlook at “negative.”

State Senate Minority Leader John McKinney (R-Fairfield), who warned Friday that bond rating agencies would not ignore the record level of borrowing approved by the governor, said, “Governor Malloy broke the promise he made to bond rating agencies and, more importantly, to the people of Connecticut. It is not surprising that rating agencies continue to look unfavorably upon his actions.”

In January, the governor represented to taxpayers, members of the bond commission and bond rating agencies that the state would stay “significantly below” the self-imposed $1.8 billion limit he set for G.O. bonds in 2013. On Friday, he allocated $396 million in new G.O. bonds, bringing total G.O. bonding for 2013 to $1.789 billion. That is a 28% increase over the previous year with additional borrowing likely to be approved in the coming months.

Fitch Ratings first downgraded Connecticut’s outlook to negative in July 2013. Moody’s Investor Services also has downgraded Connecticut’s G.O. bond rating during Governor Malloy’s term in office. One reason ratings agencies gave Connecticut poor fiscal marks, was the fact that the state’s high fixed costs for debt, pension and other post-employment benefits (OPEB) relative to its budget remain among the highest in the nation.

McKinney said, “This level of borrowing and these broken promises show a lack of leadership, a lack of fiscal responsibility, and a lack of consideration for the taxpaying public. It also shows a failure to learn from past mistakes. Governor Malloy’s record tax increases, borrowing and overall fiscal mismanagement of our state have resulted in Connecticut being the only state in the nation whose economy shrunk in 2012. Our unemployment rate is too high, jobs are leaving the state, we are overtaxed, and our governor is doing nothing to change the trajectory of those trends.”

In addition to the $575 million in G.O. GAAP conversion bonds scheduled to be issued in October, the treasurer is also scheduled to issue an additional $2.1 billion in G.O. bonds before the end of the fiscal year.