Fitch Removes Negative Outlook from Connecticut

Fitch Ratings removed its negative outlook on Connecticut's general obligation bond rating, restoring a stable outlook while affirming its AA rating.

Moody's Investors Service and Kroll Bond Rating Agency maintained Aa3 and AA ratings, respectively, with stable outlooks. Standard & Poor's maintained its AA rating, with a negative outlook that it assigned in March.

Fitch said the revision "reflects the state's ability over the last biennium to address revenue underperformance despite its still incomplete progress in rebuilding fiscal flexibility and within the constraints posed by its high fixed costs."

Connecticut has scheduled a $500 million competitive GO bond sale for Aug. 4, split equally between tax-exempt and taxable.

"Fitch's independent review validates what my office has been saying for some time -- that the state's economy as a whole has made tremendous progress," state Treasurer Denise Nappier said in a statement. "The commitment to fully funding long-term liabilities and to a structurally balanced budget is paying off."

In presentations to the rating agencies, the Treasury and Office of Policy & Management cited the on-time, balanced $40 billion budget and minimal use of non-recurring revenues, or "one-shots."

In addition, Connecticut will fully fund its annual commitments to its pension systems and the annual amortization of the remaining accumulated deficit related to its conversion to generally accepted accounting principles.  The budget also includes more than $180 million for payment on economic recovery notes, outstanding since 2009, and Nappier said the state is on track to fully repay these notes in 30 months. 

State officials also cited new funding for transportation infrastructure and municipal aid supported by a portion of the sales tax. According to Nappier, the state is working to rebuild its reserves, now roughly $448.3 million after accounting for the resolution of the fiscal 2015 deficit of $71 million.

The proceeds of the August sale will be used as follows: $134.3 million for various housing programs; $119.1 million in economic development related to manufacturing assistance; $69.2 million in state grant programs; $56.4 million in municipal grants; $29.2 million for the housing trust fund; $21.2 million to fund various state building projects; $20 million for town road aid; $20 million to non-profit health and human services providers; and $10 million for the small town economic assistance program. In addition, $20.6 million will fund the construction of a new Sandy Hook School in Newtown.

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Connecticut
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