Connecticut's Fiscal Woes a Long-Term Issue: Moody's

Connecticut’s budget woes are here to stay for the foreseeable future according to Moody’s Investor Service.

The state remains as one of the wealthiest in the nation, but growing fixed costs from pension, retiree health care and bonded debt liabilities continues to hamstring finances.

“State lawmakers are considering measures that will make the fixed cost pill somewhat easier to swallow, but will not be able to avoid a lengthy period of constrained spending choices,” Moody’s said in an April 5 report.
Connecticut’s fixed costs for pension and retiree health costs are among the highest of the 50 states and drew about 30 percent of the state’s revenue in fiscal year 2016.

Fixed costs aren’t the only long-term woe for Connecticut’s coffers. The state’s economy has entered a “new normal” of anemic job and income growth. The finance sector has lost 11 percent of jobs since 2007 and other employment sectors haven’t made up for the loss. Connecticut was also only one of four states to lose population annually since 2013.

President Donald Trump’s promise to bolster military spending could be a boon for defense manufacturing, but it likely won’t be able to make up for the very high income earners in finance that have been lost.

Gov. Dannel Malloy’s changes to municipal would help Connecticut’s coffers, but it could affect the credit of municipalities who would have to be more self-reliant on funding.

Connecticut is one of only a handful of states that takes the full burden of paying for teacher pensions, something that accounted for $1 billion in spending during 2016. The state has also had a long-term problem of funding its pension obligations.
Read the full Moody’s report here.

Image via Jessica Hill/Associated Press