May 8, 2017

S&P Global: CT fiscal troubles could lead to strains on credit

While many states struggling with budget deficits are likely to see a revenue rebound in fiscal 2018, Connecticut's budget crisis is one of a handful across the country that S&P Global Ratings says may wind up in worse condition, according to a new analysts' report.

Connecticut and six other states are susceptible to "enough fiscal stress to strain their credit quality even as the broader economy shows signs of gathering momentum," according to S&P. Besides Connecticut, other states confronting fiscal crises include Alaska, Illinois, Kansas, Louisiana, New Jersey and Pennsylvania.

Fixed costs are highest in Connecticut, Hawaii, Illinois, Louisiana, Maryland, and Oklahoma, the analyst notes.

Connecticut's fixed costs represent an estimated 27.9 percent of the budget for fiscal 2017 and 29.2 percent for fiscal 2018, while budget reserves are estimated to be depleted by fiscal 2017.

Gov. Dannel P. Malloy's proposed two-year budget calls for "significant ongoing cuts to maintain structural balance in light of weak revenue growth," the analyst wrote, while depending on large labor savings either through layoffs or contract re-negotiations.

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