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June 22, 2017

S&P: CT debt service not at risk

With 16 states still in 11th-hour budget talks as their fiscal years close, Connecticut is not as bad off as some, according to a fresh report from S&P Global Ratings.

Unlike some states on the precipice of approving their upcoming budgets, Connecticut is not likely to incur a missed debt service payment if its budget is moderately late, the ratings agency said, though it did not define “moderate.”

Though debt secured by annual state appropriations could be affected by a late adoption of a Connecticut budget, the state’s claims its next debt payment is not due until December, S&P Global said.

Connecticut’s more than $5 billion budget gap is the main cause of its troubles, the ratings agency said. Although Gov. Dannel P. Malloy has established guidelines to manage government until a budget is set, major points of contention involve state labor union negotiations and the governor's proposal to require local governments to pick up a third of annual teacher pension system employer contributions, S&P said.

Alaska is one state, S&P said, whose failure to enact its budget prior to the start of the fiscal year signals a more dangerous breakdown of structural fiscal alignment. In that case, S&P Global said it has put the state on a creditwatch with negative implications.

In New England, all the other states except Vermont have unresolved budget plans.

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