Malloy warns legislators about possible downgrade in state's bon - WFSB 3 Connecticut

Malloy warns legislators about possible downgrade in state's bond rating

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Legislators are in the process of crafting a budget (WFSB) Legislators are in the process of crafting a budget (WFSB)
HARTFORD, CT (WFSB) -

Many in the state are keeping a close eye on the budget as it gets shaped, but it's not only residents who are concerned.

The credit rating agency, Moody’s, is also watching.

Governor Dannel Malloy sent a letter to legislators warning that a downgrade could be coming.

A downgrade would make it harder and costlier for the state to borrow money. But there are so many consequences that come from that and they eventually trickle down to the taxpayers.

If Connecticut loses its investment-grade bond rating, set by Moody's, officials are warning, there won't be money to pay for the fixes and the projects to maintain our roads and bridges.

Dr. Farhad Rassekh, economics professor at the University of Hartford, explained what Moody's examines when determining its rating, saying “They look at the job growth, economic growth, they look at flow of population and businesses.”

Right now, according to Moody's, job growth here is not at pre-2008 recession levels. And we've seen businesses, most notably GE, leave the state.

“We have an outflow of both people and businesses in the last several years,” Rassekh said.

Malloy sent legislators a letter, urging them to craft the budget in a way that won't affect the Moody's rating. They want to see the state moving towards a balanced budget.

“A budget only has two items, revenue and expenditure,” Rassekh said.

If the state plans to raise revenue through taxes, it’ll be a dangerous game, because taxes are already so high, further hikes could drive more people out, so saving money through cutting services might be the only way to go.

“Expenditures must be cut,” Rassekh said.

Legislators will be responsible for making those cuts.

“In January, we passed a bill to restructure the debt. Bonding companies like that aspect,” said State Rep. Joe Aresimowicz (D- Berlin/Southington).

“We are trying to work on our unfunded liabilities, especially pensions, I think it's a good sign to show progress there,” said State Rep. Livvy Floren (R-Greenwich/Stamford).

Last year many were amazed at the deep cuts into state services so it'll be interesting to see what more could be trimmed. And already this year, we have seen proposals for new taxes, like the soda tax.

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