- Associated Press - Thursday, May 19, 2016

HARTFORD, Conn. (AP) - Two bond rating agencies on Thursday downgraded Connecticut’s credit worthiness, citing uncertainty about whether the state has the financial flexibility to handle any future budget challenges.

Both Standard & Poor’s and Fitch Ratings announced their credit ratings for Connecticut’s General Obligation bonds dropped from AA to AA- with a stable outlook. A lower credit rating can result in higher borrowing costs for the state.

David Hitchcock, S&P; Global Rating’s credit analyst, said substantial revenue shortfalls over the past year have left Connecticut with “low reserves” and an increasing share of its budget devoted to fixed costs.

“In our opinion, Connecticut has less flexibility to meet unanticipated revenue shortfalls, such as those that occurred in fiscal 2016, and may be poorly positioned should there be a national economic downturn in the next several years,” he said.

Gov. Dannel P. Malloy’s budget office on Thursday declined to comment on the ratings drops, instead touting news that two other agencies, Moody’s Investor Services and Krull Bond Ratings, maintained their bond ratings for Connecticut. Moody’s rating is Aa3 and Krull is AA. Both agencies have negative outlooks for Connecticut, which means the rating may be lowered.

Office of Policy and Management Secretary Ben Barnes said the new $19.7 billion budget approved last week by the General Assembly will help strengthen the state’s fiscal picture as the state “adjusts to the new economic reality” of less revenue.

Barnes noted how the agencies recognize structural changes are being made to Connecticut’s budget. State Treasurer Denise Nappier, a Democrat, agreed that Malloy and the Democratic-controlled legislature “have come to grips with the need find ways to live within our means” and have positioned Connecticut in the right direction.

House Minority Leader Themis Klarides, R-Derby, called Nappier’s comments “absurd.”

Senate Minority Leader Len Fasano, R-North Haven, argued the state has not made the changes needed to ease the minds of credit agencies.

“If we had enacted a spending cap and implemented a cap on bond allocations and issuances, then these rating agencies would have seen a serious effort to tackle state spending habits and growing debt,” he said.

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