Despite concerns about negative outlooks earlier this year after the state passed a budget but before the state employee agreement, Wall Street’s three major credit rating agencies have reaffirmed Connecticut’s AA rating, according to a statement from state Treasurer Denise Nappier.
Moody’s Investor Service, Standard & Poor’s and Fitch Ratings all chose to keep the state’s general obligation bonds rated at AA and Aa2, Nappier said Friday.
“Our solid AA debt rating recognizes the strong financial management of the state and the credit quality of our bonds,” Nappier said. “These conclusions indicate that Connecticut’s budget has achieved structural balance and that our economy is recovering from the affects of the Great Recession.”
In June Moody’s Investor Service downgraded Connecticut’s outlook from stable to negative mainly because of the state’s unfunded pension liability.
As of June 30, 2010, the funded ratio for Connecticut’s State Employees Retirement System was 44 percent one of the lowest in the country, according to Moody’s.
The rating agency said the low funding ratio of the state’s pension fund is the result of “generous bargaining agreements; early retirement incentive programs; and recent market returns that have been less that the assumed rates of return.”
“I think Moody’s is as concerned as I am that when you have a pension fund that’s as unfunded as ours is and you’re not in a position to take the appropriate steps to address that then that’s gotta be a concern,” Malloy said back in June.
But Malloy remained optimistic because “an outlook is less important than a rating,” he said.
Today’s rating announcement is good news for the state since it’s about to begin a bond sale.
The state Treasury will begin selling $715 million in general obligation bonds Friday. Bonds from the sale will be used for a variety of new projects, according to the statement.
Nappier said $335.7 million will be used for school construction grants; $54.6 million will fund improvements to state community technical colleges and $30 million will be used to replenish the Capitol Improvement Fund. About $79.7 million will go to other building projects, the statement said.
“These vital and substantial infrastructure investments help preserve and create jobs while adding fuel to our economic engine,” Nappier said.
Another $165 million will be used to refinance the state’s debt at lower interest rates, the statement said.
Individual investors looking to purchase bonds will be given priority from Friday until Oct. 31, while the bonds will be offered to institutional investors from Nov. 1 to Nov. 14, the statement said.