Wall Street agency gives CT pension deal a ‘credit positive’
The first review from Wall Street on a new plan to stretch out Connecticut’s spiking state employee pension costs is a positive one.
Moody’s Investors Service, one of the four major credit rating agencies, labeled the proposal negotiated by Gov. Dannel P. Malloy’s administration and state union leaders as a “credit positive” for Connecticut in the agency’s weekly credit outlook statement. The deal also reflects elements of proposals by state Comptroller Kevin P. Lembo and by state Treasurer Denise L. Nappier.
The declaration of a “credit positive” is not — by itself — a rating upgrade that often results in lower borrowing costs. But it is a development deemed to be a positive factor in the agency’s evaluation of the state’s finances.
“Connecticut’s pension burden as a percent of revenues is one of the highest of all 50 states,” Moody’s wrote. “The new agreement sacrifices the goal of amortizing the unfunded pension liabilities over a shorter period, but allows for more affordable pension contributions and a more conservative investment return assumption.”
Moody’s did express concern that Connecticut would increase projected pension payments on future taxpayers — at least $13.8 billion between 2033 and 2046.
But it said this negative element of the deal “is outweighed by other features.”
Moody’s praised Connecticut for lowering the assumed rate of return on pension fund investments from a yearly average of 8 percent down to 6.9 percent. It noted that fewer than 19 percent of state pension plans employ a rate below 7 percent.
The agreement also tries to keep annual pension costs — which currently stand at $1.6 billion — from growing much beyond $2.2 billion between now and 2032.
Earlier projections had the annual cost reaching as high as $6.6 billion 16 years from now.
The deal, which has been ratified by the State Employees Bargaining Agent Coalition, is pending before the General Assembly.
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