In a sign of budget progress, Standard & Poor’s upgrades Conn.’s credit rating
The state of Connecticut received good news Monday in the form of a credit rating increase by Standard & Poor’s for its general obligation bonds, a move that will save millions of dollars in interest fees and recognizes the ongoing improvement of its fiscal picture.
The upgrade by S&P, announced after business hours, follows 2021 upgrades by S&P and the other three major Wall Street bond rating houses. Prior to that, Gov. Ned Lamont’s office said, Connecticut had last seen an upgrade in February 2001 — before the 9/11 attacks.
The upgrade moves Connecticut to AA- with a stable outlook, up from A+. The level remains below S&P’s AA, which state bonds had in most years between 1975 and early
2016. It comes just ahead of a $900 million state bond sale scheduled for next week.
“Connecticut taxpayers should celebrate today’s news,” Lamont said in a written release. “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.”
The upgrade follows two significant announcements over the last few days. On Friday, two state budget agencies reported a higher projected operating surplus for the current fiscal year, which ends June 30. Lamont’s budget office pegged the surplus at $1 billion, more than double the overage projected last month. The same report also said the state is on track for a $1.8 billion surplus in a separate account not part of regular state spending.
Also last week, Lamont said he intends to ask lawmakers to continue with a 2017 budget reform that has led to billions of dollars in budget savings. Under the reform, tax collections from capital gains and dividends above a certain threshold cannot be used in the budget and must be put into the state’s rainy day fund. The state’s legal agreement to follow that reform, written into bond contracts, expires June 30 and that is what Lamont will seek to extend.
S&P, in a note to investors that was released by Lamont’s office, mentioned that change along with the state’s efforts to reduce long-term liabilities, “which supports our view that the state remains more firmly committed to these provisions for the foreseeable future.”
Jeffrey Beckham, Lamont’s budget chief, said, “If we are going to continue the positive progress made under this administration, those bond covenants and associated benefits must be a part of the final budget bill.”
Outgoing state Treasurer Shawn Wooden issued a separate statement saying he recently gave presentations to the four bond rating firms; S&P, Moody’s, Kroll and Fitch Ratings. Fitch is owned by Hearst, the parent of Hearst Connecticut Media. The upcoming bond sale includes $250 million to refinance earlier bonds, $250 million for school construction and the rest for general state projects, Wooden said.
S&P also upgraded other state ratings, such as UConn bonds and transportation bonds.
“As my term as Treasurer comes to an end, I am proud to have led the Office of the Treasurer in efforts that have resulted in five historic credit rating upgrades,” Wooden said, referring to the four firms acting once each in 2021 and Monday’s move by S&P.