S&P Upgrades State’s Credit Rating, Cites Guardrails

S&P Global Ratings has upgraded Connecticut’s credit rating, the latest endorsement of the 2018 bipartisan fiscal reforms.

The Wall Street rating agency revised its outlook to positive from stable and affirmed its AA- rating on the state’s general obligation debt.

In addition, it upgraded its outlook to positive from stable and affirmed ratings on a range of other debt instruments, including senior-lien special tax obligation bonds and appropriation-secured debt.

In a Sept. 24 statement, S&P said the revision “reflects our view of Connecticut’s commitment to reducing its high unfunded pension liabilities while sustaining budgetary balance and healthy reserves.”

“The outlook revision also reflects our expectation that the state will maintain its commitment to fiscal balance and reducing long-term liabilities in the next fiscal biennium, while not significantly altering the guardrails it established to support budget predictability and fiscal balance, lower unfunded pension liabilities, and limit annual debt issuance,” the agency noted.

‘Resounding Endorsement’

Wall Street agencies have upgraded Connecticut’s credit ratings eight times since the fiscal reforms were implemented, after almost two decades without an upgrade.

Those upgrades help reduce borrowing costs through lower interest rates. Debt service accounts for more than 10% of the state’s annual budget.

The 2018 fiscal reforms—which feature guardrails designed to reduce Connecticut’s huge state employee pension liabilities—have saved taxpayers hundreds of millions of dollars annually.

“Connecticut is rapidly paying down its long-term debt, reducing fixed costs for taxpayers, and strengthening the retirement systems upon which our public employees depend,” Gov. Ned Lamont said in a statement.

CBIA’s Chris DiPentima welcomed the latest credit upgrade, calling it “another resounding endorsement of the 2018 fiscal reforms.”

CBIA president and CEO Chris DiPentima called the latest credit rating upgrade “another resounding endorsement of the 2018 fiscal reforms and the legislature’s unanimous extension of the fiscal guardrails three years ago.”

DiPentima warned that businesses remained concerned over pressure to weaken the fiscal guardrails and further boost state spending‚ already one of the highest per capita in the country.

He noted this year’s budget adjustments, which relied heavily on weakening the state’s fiscal guardrails, one-time revenue measures, and off-budget transfers.

“Those who want to dismantle the guardrails must heed S&P’S warning—Connecticut has a long way to go to fully restore its fiscal health and stability,” he said.