Moody’s reviewing potential downgrades of 29 CT towns, cities and school districts
HARTFORD — A bond credit rating agency has placed ratings of 26 Connecticut cities, towns and three Connecticut regional school districts under review for downgrade, affecting approximately $3.5 billion in outstanding debt.
In a press release Monday, Moody’s Investors Service said “Connecticut has been operating without an approved budget since the beginning of the current fiscal year on July 1. In the absence of a budget, expenditures are controlled by executive order from the governor. Under the executive order currently in effect, state funding of local governments is lower than it was in the last fiscal year by a total of $928 million.”
Moody’s said, historically, the state of Connecticut “has provided significant funding to its local governments, largely in the form of education cost sharing grants, but also in the form of payments in lieu of taxes (PILOTS) and other smaller governmental grants. The current budget impasse highlights the ongoing vulnerability of funding that the State of Connecticut provides to its local governments.”
“We have placed under review for downgrade ratings of 26 municipalities and 3 regional school districts facing cuts in state funding equal to 100% or more of available fund balance or cash. We have assigned negative outlooks to ratings of 14 local governments and 2 regional school districts and reiterated an existing negative outlook on 1 local government facing cuts in state funding equal to between 75% and 100% of available fund balance or cash.
In addition, we have assigned negative outlooks to 11 local governments and 1 regional school district which, in the absence of other revenue measures or cuts in expenses, would need to raise property taxes by 10% or more to make up for the decline in state funding from fiscal 2017 to what is provided under the executive order currently in effect. We have evaluated regional school district credits based on lost state funding of participant towns relative to those towns’ available fund balances and net cash and tax increases required to offset lost funding.”
The Connecticut Conference of Municipalities (CCM) said it was stunned by Moody’s report, releasing the following statement:
“Joe DeLong, CCM Executive Director, said in response: “Such action only serves to reinforce that while state legislative leaders claim to have been meeting in good faith to resolve the state budget impasse, the time for action on a state budget agreement is now. This announcement highlights the past nine months of failures by the Governor and General Assembly to enact a state budget.
These actions by Moody’s will have a devastating impact on nearly 60 communities across the state — subjecting each of them to a credit downgrade that will increase their borrowing costs, potentially explode their property tax rates, and limit their ability to fund necessary municipal projects both in the short-term and long-term. Sadly this could have all been avoided.”
Senate Republican President Pro Tempore Len Fasano (R-North Haven) released the following statement:
“This is devastating news for our state. The governor’s decision to reject the only budget that passed the legislature, along with years of failed policies, created the instability our towns and cities face today. It created chaos on top of an already damaging fiscal crisis. Those who refused to override the governor’s veto are complicit in this failure to fund towns, cities and social services. Today’s news makes it clear that shifting more burdens onto our towns and cities is no way to balance the state budget and why I will continue to advocate for a budget that creates stability and protects our municipalities, our schools and our property taxpayers from more burdens, just as they were protected in the budget the legislature already passed.”