In an unprecedented act of fiscal constraint, the House gave final passage Saturday to a bill that eliminates $422 million in previous bond authorizations.
Previously authorized projects for both municipalities and state agencies were reduced or eliminated altogether in the bill.
When state revenues dropped this year, lawmakers were forced to come up with a list of projects to take off the state’s credit card as it approached the 90 percent bonding cap.
“We have done everything possible to reach that 90 percent self-imposed cap we put in place during the income tax years,” Rep. Carlo Leone, D-Stamford, said.
Even though he voted in favor of it, Rep. Shawn Johnston of North Grosvenordale, wanted to know if the state intended to increase the number of projects it puts on the state’s credit card now that its gotten rid of some. He asked specifically about the $270 million in new bond authorizations for the expansion of the University of Connecticut hospital.
Leone said the legislature will address those requests as they come up.
“This legislation represents the largest reduction in state bond authorizations in recent memory,” said Sen. Donald DeFronzo Friday night when the same bill passed the Senate. “This proposal moves the state well below the bonding cap and is an essential step in controlling future debt for the state of Connecticut and preserving the state’s standing with credit rating agencies.”
Friday afternoon the state Treasurer Denise Nappier announced that the state’s bond rating has been moved by two of the three bond rating agencies. However, the ratings were adjusted based on the way in which the two rating agencies calibrate the municipal bond market.
The state received more favorable ratings for its general obligation bonds under the recalibration. Moody’s raised the state’s rating from Aa3 with a negative outlook to Aa2 with a stable outlook. Similarly, Fitch increased the state’s rating from AA with a negative outlook to AA+ with a negative outlook. Standard and Poor’s—which has not announced a ratings recalibration—continues to rate the state’s general obligation credit at AA with a stable outlook.
“As we recover from the worst economic downturn in a generation, these increased credit ratings will translate to improved market access and increased investor demand for municipal bonds which will ultimately benefit the citizens of the State of Connecticut,“ Nappier said in a press release. “The higher credit ratings will bring in new investors which may not have purchased these bonds previously with the lower credit ratings.”