And the hits just keep on coming.
Another Wall Street credit rating agency, S&P Global Ratings, downgraded Connecticut’s bond rating Wednesday — the state’s third in the past four business days.
S&P lowered the state’s general obligation bond rating from AA- to A+, potentially raising borrowing costs in the future.
S&P originally reported that it also had reduced ratings for the state’s building program for the University of Connecticut. But S&P later corrected that and indicated the UConn 2000 program had not been downgraded.
Selling general obligation bonds on Wall Street is the principal means state government uses to finance municipal school construction, capital projects at public colleges and universities, renovation of state buildings, and open space and farmland preservation.
General obligation bonds are repaid with resources from the state budget’s General Fund. This fund includes receipts from income, sales and most other taxes, gaming proceeds, several categories of federal grants, and revenues from various fees.
The announcement by S&P comes two days after a similar downgrade by Moody’s Investors Service. Fitch Ratings Inc. lowered its bond rating for Connecticut on Friday.
The ratings agencies have cited rapidly eroding state income tax receipts, the impending depletion of the state budget reserve, and huge unfunded liabilities expected to drive public-sector retirement benefit costs up for the next 15 to 20 years.
State Treasurer Denise L. Nappier said, “The announcement by S&P Global Ratings is not totally unexpected, given that it has had Connecticut on negative outlook for the better part of six months. This is the latest shoe to drop. …There is hard work ahead for all of us and, in particular, those in the midst of budget negotiations. Our decisions will impact on our state’s quality of life for its people and businesses alike. By doing the best we can in collaboration with one another, we can and will get through it.”
Wednesday’s action by S&P also marks the sixth downgrade for state government in the past six months among the four major credit rating agencies.
Fitch and S&P Global Ratings also downgraded the state in May of 2016, while Kroll Bond Rating Agency did so just two months later.