S&P Global Ratings upgraded Connecticut’s general obligation bonds from A+ to AA-. At the same time it upgraded Connecticut’s special tax obligation bonds for transportation from AA- to AA and the University of Connecticut bonds from A+ to AA-.
The news comes a year after all four major credit rating agencies upgraded Connecticut’s general obligation bonds. S&P Global Ratings also maintained Connecticut’s “stable” outlook.
“Before the series of credit rating upgrades that began in March 2021, three of the four rating agencies rated the State’s GO bonds in the lower single ‘A’ category,” Treasurer Shawn Wooden said. “With today’s announcement by S&P, all four of the GO bond credit ratings are now in the higher ‘AA’ category.”
Wooden added: “Achieving ratings within the ‘AA’ credit category was a key priority for my administration. Today’s announcement by S&P accomplishes this goal, recognizing Connecticut’s smart fiscal policies, financial discipline and improving fiscal trajectory. However, the real winners today are the residents of Connecticut because this rating upgrade will help lower borrowing costs for projects and services across the state, saving taxpayers millions of dollars.”
In its analysis S&P Global Ratings said it upgraded the bonds to reflect “our view of Connecticut’s sustained positive financial results and building of high reserve levels during a recent period of economic and revenue growth,” S&P Global Ratings credit analyst Thomas Zemetis wrote.
Zemetis pointed out the “commitment to structural budget balance and curbing future growth of the state’s very high debt, pension, and other postemployment benefits liabilities, which we expect will continue in future biennial budgets.”
He said the credit rating is underscored by Gov. Ned Lamont’s announcement to extend the financial controls passed as part of the bipartisan budget in 2017 into the future.
As part of that bipartisan budget, lawmakers created what’s called a “bond-lock” which prevented lawmakers from repealing those various spending, revenue, volatility and bonding caps.
“Extending these protections will send a strong signal to businesses, investors, credit rating agencies, and the public at large that Connecticut is serious about living within our means and saving for the future,” Lamont has said. “As we develop a budget proposal that will be delivered to the General Assembly in February, these protections and their associated benefits will serve as the backbone of that proposal.”
Following the news of the upgrade Monday, Lamont said “This credit rating increase will mean lower costs for critical projects that move our state forward. It is a signal to the businesses and residents that our state is on the right financial path, that we have shown a commitment to putting our fiscal house in order, and we are continuing to make significant progress to address our pension and other postemployment benefit liabilities. S&P recognizes the progress that has been made and that Connecticut is getting its mojo back.”
At times during his first term the governor clashed with legislative Democrats, who sought to increase taxes on the state’s most wealthy residents or skirt around fiscal guard rails in an effort to fund spending priorities. Lamont signaled this week he would not “hedge” on revenue and spending caps.
“They helped us get this state back on track when it comes to getting our fiscal house in order,” Lamont said earlier this month. “Basically it says you’re not going to spend more than what you can count on in terms of revenues. I think it’s served us very well and I am going to be asking the legislature to continue that going forward. It gives us a clear sense of direction.”