HARTFORD, Conn. – State budget troubles provided the backdrop Tuesday as Connecticut sold $650 million in general obligation bonds.
Wells Fargo and Morgan Stanley repriced the sale; a green bond component totaled $65 million, or one-tenth of the par amount. The sale followed a one-day retail period.
Criticism laced presale reports from bond rating agencies, though they held their ratings steady.
"The state has experienced chronic economic and fiscal challenges during the current economic expansion and consequently, its scope of flexibility to address future cyclicality … has been reduced," Fitch Ratings wrote.
"Economic trends will place negative pressure on the state's finances in the next few years," Moody's Investors Service added.
Moody's rates Connecticut GOs Aa3 with a negative outlook. S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency assign AA-minus, all with stable outlooks.
The $585 million of GO bonds were yielded from 0.95% with a 2% coupon in 2017 to 3.53% with a 3.375% coupon in 2036.
The $65 million of GO green bonds were repriced to yield from 3.10% with a 4% coupon and 2.85% with a 5% coupon in a split 2030 maturity to 2.92% with a 5% coupon in 2031.
Last week, the state General Assembly's Office of Fiscal Analysis projected a roughly
In addition, the state may not be able to verify whether it can achieve budgeted income tax collections at least until January. Of the $209 million in bottom-line savings targets budgeted, $60.6 million remains unidentified.
"The estimate assumes these savings are achieved in full by the end of the fiscal year," the report said.
Projected deficiencies in debt service and adjudicated claims, meanwhile, are driving expenditures above the budget.
"It's more of the same message," said Alan Schankel, managing director at Janney Capital Markets in Philadelphia. "They've made some mid-course corrections and done some of the right steps, but they've got some structural problems, a high pension liability and a lagging economy."
The budget strife contrasts with Connecticut's wealth metrics. According to Ramirez & Co., Connecticut is the nation's wealthiest state, with a per capita income of 140% of the national average.
Senate Minority Leader Len Fasano, R-North Haven, said the rating agency reports "codified" what Republicans have been saying for years.
"All these comments we have seen before," he said. "They're saying: 'You don't have control over your own bed.
"The Democrats refuse to have a sober moment and say 'what have we been doing wrong'? We will have only one wakeup call, and that will be Nov. 8 [election day]."
The wobbly condition of capital city Hartford and a pending court case about the state's school-aid funding formula add even more uncertainty.
S&P and Moody's nailed Hartford with four-notch downgrades within the past month, the latter dropping city GO bonds to junk. Mayor Luke Bronin, who last spring asked the state legislature to impose an overboard board that he himself would chair, has proposed regional and state solutions such as a regional tax.
Schankel said Connecticut's problems undoubtedly weigh on Hartford's.
"Connecticut has a lot of wealthy resources but the lack of budget flexibility really hurts downstream," he said. "That hurts Hartford the way New Jersey's problems are aggravating Atlantic City's."
Connecticut, meanwhile, is appealing an order by state Superior Court Judge Thomas Moukawsher to rework its aid-distribution blueprint and better serve students in lower-income communities. The 11-year-old case Connecticut Coalition for Justice in Education Funding v. Rell adds even more uncertainty.
Bronin called existing funding disparities "shameful" during an interview at City Hall.
"You can't deny how large the disparities are and how great the achievement gap is, and we have, as a state, concentrated poverty in our cities," he said.
