Connecticut has fully paid the outstanding liability related to the economic recovery notes it issued in 2009, Gov. Dannel Malloy and state Treasurer Denise Nappier announced Tuesday.
At the time, under then-Gov. Jodi Rell, a Republican, the state borrowed money to cover its operating expenses when it closed the fiscal year with a deficit of more than $900 million and a depleted rainy day fund.
Monday’s payment “closes a regrettable chapter in Connecticut’s financial history,” said Malloy, a Democrat who will not seek re-election this year. “Surely, reasonable minds agree that we must avoid repeating this costly decision.”
Malloy is scheduled to present his updated budget when the General Assembly reconvenes Feb. 7.
“It is always good news when we are able to retire state debt, but we must remember why we incurred this debt in the first place,” said Nappier. “Keeping the budget balanced and building up the budget reserve fund remain daunting tasks but ones we must adhere to. We must employ innovative ways to address the state’s fiscal problems, such as the recently adopted tax-secured bonding program.”
Nappier proposed the latter as a means to raise the state’s credit rating and to lower borrowing costs while rebuilding the reserve fund.
S&P and Fitch Ratings rate Connecticut’s general obligation bonds A-plus, while Moody’s Investors Service and Kroll Bond Rating Agency rate them A1 and AA-minus, respectively.
In 2009, Rell and the General Assembly could not agree on a plan to grasp a deficit of more than $900 million. Depleted reserves left the economic recovery notes as the sole option.
The state paid $1.09 billion overall, including $923.8 million of principal and $166.3 million in interest. The state refinanced the bonds in 2013 and the following year.
The refinancing lowered the interest costs to $166.3 million from $170.1 million and extended the repayment period from seven years to just over nine years. These changes enabled the state to lower its annual payment to roughly $178 million from a projected $208 million.