Rich State, Poor Rating
By LEANNE GENDREAU
Updated 12:45 PM EST, Wed, Oct 28, 2009
We’re the richest state in the country, but Wall Street’s not impressed with what we’re doing with our money, particularly in the last year and a half.
Moody’s Investment Service is the preeminent source on good and bad bond ratings. It’s important because it ultimately affects what it will cost the state to borrow money.
Understandably, Gov. M. Jodi Rell and others are not happy about it.
“Being forced to pay higher interest rates on our bonds would have serious and lasting financial effects in both the near- and long-term,” Rell said in response.
The number-crunchers have given us a negative rating, down from stable.
Our decline from stable comes in part from decisions that politicians have made since the recession: to deplete the rainy day fund, operate with budget shortfalls and to use federal stimulus cash for ongoing needs.
We’re also too dependent on the residents who earn the most, Moody’s feels.
“As the wealthiest state in the nation, Connecticut is disproportionately reliant on taxes paid by wealthy residents and is particularly vulnerable to fluctuations in tax receipts related to capital gains and exercise of stock options,” according to Moody’s.
Since the rating came out, politicians have been using the findings to justify measures they were already trying to pass.
Rell sent legislative leaders a copy of the report and a letter calling the downgrade “an alarm signal that we clearly cannot afford to ignore” and is using it to ask them not to “override my recent veto of one of the budget ‘implementer’ bills.”
“We must finally accept the necessity – indeed, the inevitability – of further reductions in state spending if we are to avoid setting up future generations for fiscal failure,” she said.
House Republican Leader Lawrence F. Cafero Jr. used the report to blast Democrats.
“The final arbiter of our state’s fiscal health has spoken. Clearly, this budget raises concerns outside of Connecticut that much of our future is built on one-time only revenues and too much borrowing,’’ Cafero said. “The Democratic tax hike, the largest in state history, was ill –conceived because, as Moody’s has noted, it relies even more on volatile personal income related to Wall Street.’’
The president pro tem of the Senate, Donald Williams, D-Brooklyn, told the Hartford Courant that "we all should be concerned about the structural holes in the budget" but "now is not the time for the governor to try to disown parts of the budget that she initially proposed — such as securitization, borrowing, and one-time fixes. Most troubling is [her] failure ... to control spending in her agencies."
First Published: Oct 28, 2009 11:23 AM EST
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