Rating Analysis
12:43 pm
Thu July 31, 2014

Fitch Maintains Negative Outlook on Connecticut Debt

Secretary of the Office of Policy and Management Ben Barnes
Secretary of the Office of Policy and Management Ben Barnes
Credit Uma Ramiah / WNPR

Ratings agency Fitch has maintained Connecticut's debt rating outlook at negative, saying the state's budget relies on one-time fixes, and calling the economic recovery "slow and uneven."

The analysis says the General Assembly budget process last session relied too much on one-time items, such as shifting millions of dollars from last year's surplus into the new budget. It also criticized the use of money from the Transportation Fund, and the delay in paying down the deficit that will allow the state to convert to Generally Accepted Accounting Principles.

The agency said the continued negative outlook reflects the state's reduced fiscal flexibility at a time of lingering economic and revenue uncertainty.

The Malloy administration attempted to put a positive spin on the news, with budget chief Ben Barnes pointing out that agencies reaffirmed Connecticut's debt ratings while downgrading ratings on other states. He did concede that Connecticut has more to do, and he said he believes the decision to deposit $400 million in the rainy day fund and fully funding Connecticut's pension obligations will help increase the ratings.

Fitch also had things to say about the state of the economy in Connecticut. The agency called the recovery slow and uneven since the recession, and said the finance sector, one of Connecticut’s mainstays, continues to weaken. Connecticut's personal income tax collections are volatile, making revenue forecasts difficult.