By most measures the wealthiest of states, Connecticut has faced significant economic challenges in the post-recession period, Janney Capital Markets said in a special report on the state's debt.

"Due to diversification considerations and despite beneficial tax treatment of interest on Connecticut bonds for Connecticut residents, we recommend that no more than 50% of a municipal bond portfolio consist of bonds from a single state," Philadelphia-based Janney said in the report, authored by managing director Alan Schankel.

According to Janney, Connecticut's economy is diverse, with the health-care and education sectors contributing the most job growth during and after the recession. A strong transportation related revenue stream secures special tax obligation debt, with debt service coverage exceeding 2.5 times.

Janney said bonds supporting the state's single-family housing program "are among the most strongly secured housing bonds is the country." The Connecticut Housing Finance Authority has $4.2 billion of debt outstanding and triple-A ratings from Moody's Investors Service and Standard & Poor's.

Also, said Janney, the state's Clean Water and Drinking Fund, rated triple-A across the board, is one of the strongest issuers in the state.

Connecticut carries $14.8 billion of general obligation debt, its primary borrowing vehicle. Moody's Investors Service rates the GO bonds Aa3, while Fitch Ratings, Standard & Poor's and Kroll Bond Rating Agency assign AA ratings.

Fitch assigned a negative outlook, while the other rating companies assigned stable outlooks.

"Connecticut is a prolific issuer of bonds," said Janney.

Standard & Poor's this week raised its unenhanced rating on Waterbury, Conn.'s general obligation debt two notches to AA-minus from A, based on its new criteria.

GO debt is Connecticut's primary borrowing vehicle. The state also has $3.3 billion of special tax obligation debt.

Critics of Democratic Gov. Dannel Malloy's administration say Connecticut bonds excessively. Last month, when Connecticut came to market with a $575 million bond sale, Senate Minority Leader John McKinney, R-Fairfield, said Malloy's administration is on pace to shatter a $1.8 billion bonding limit that he promised rating agencies he would not exceed.

"Keep in mind that the state issues bonds for projects that in most states are handled by county or municipal government. So, for example, more than 25% [per our last analysis] of our bond authorizations were for K-12 education-related construction projects," state budget director Benjamin Barnes said in a statement Friday afternoon.

"The state continues our commitment to responsibly addressing our significant long-term liabilities. We have made significant progress in addressing pension liabilities, have implemented [generally accepted accounting principles budgeting], and have begun to make deposits into the rainy day fund. Connecticut has considerable economic strengths, including high incomes, high levels of education, strong property values and high productivity."

Connecticut ranks highest in per-capita income, at $58,900, well above the national average of $42,700. Janney cited a combination of high-paying manufacturing jobs and many people working in finance, insurance and real estate. But Janney also warned that Connecticut is vulnerable to continued or accelerated federal funding declines.

"One of the purposes of financial service firms is to sell financial instruments to the public at large as well as to disseminate accurate analytical information regarding those instruments. As is the case for all investors and savers, caveat emptor should always be in the forefront of their decision making," said state Sen. Scott Frantz, R-Greenwich, a ranking member of the General Assembly's finance, revenue and bonding committee.

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