According to
USDebtClock.org, the state of Connecticut faces a statewide debt of more than $38 billion, while it has approximately 157,000 people unemployed. It brings in revenues accounting to $32 billion but it spends $38.5 billion.
Connecticut Governor Dannel Malloy has attempted to stimulate the local economy by
introducing job creation tools, which includes providing loans and grants to various companies. The governor and legislators agreed to borrow $100 million from a state fund to give companies, like
Oxford Performance Materials, tens of thousands of dollars in loans.
Despite the government’s best efforts, Moody’s Investor Services
announced in a media release that it has downgraded Connecticut’s credit rating from Aa3 to Aa2. Much of the state’s debt and pension costs were major factors in the downgrade.
Also, the paucity of cash reserves and distribution of deficit bonds reflected Moody’s downgrade. Malloy’s government faced a $3.5 billion budget gap last year after he
introduced the largest tax increase. He received harsh criticism this week after tax collections came up to close to $95 million.
“The outlook for Connecticut is stable reflecting the positive steps the state is taking to address its long-standing balance sheet weakness and reduce its fixed post employment benefit costs through pension reforms,” stated Moody’s. “We expect that Connecticut's revenue trends should improve as it emerges from the recession, and the state will maintain its new commitment to structural budget balance and replenishing its rainy day fund over time.”
The governor’s budget secretary, Ben Barnes, blasted Moody’s over its credit downgrade. Barnes explained that Moody’s was attempting to cover itself in Friday’s move after
Standard & Poor’s downgraded the United States government’s credit rating last year.
“Connecticut has done all the right things to shore up our finances, and Moody’s has responded with a downgrade intended to satisfy their internal corporate need to deflect attention from their historic lack of credibility,” said Barnes, reports
CBS New York. “Connecticut has always paid its debt, and remains an attractive issuer of public debt.”
However, Republicans in Connecticut defended Moody’s decision and took jabs at the budget chief. Malloy’s opponents are calling for spending cuts and a revision in the budget during next month’s legislative session.
“The governor has so far denied warning signs; that we are on shaky fiscal ground,” said Larry Cafero, the Republican House Minority Leader, in an interview with the
Wall Street Journal. “[Moody’s] has been in business a long time, compared with Ben Barnes who’s been [budget chief] for a year, yet they’re wrong but he’s right?”
Moody’s has not responded yet to Barnes’ assertions.
