Connecticut’s ‘Debt Diet’ Pays Off With Two Bond-Rating Upgrades

Faith Isbell

(Bloomberg) — Connecticut is collecting fiscal wins this week.

The state got bond-rating upgrades from Moody’s Ratings and Fitch Ratings, both of which cited improvements to the state’s budget-management practices. Moody’s raised Connecticut by one step to Aa2 on Tuesday, and Fitch followed on Wednesday by lifting the state to AA from AA-. Both are the third-highest levels.

Moody’s referenced the state’s reduced liabilities and fixed costs, resulting in part from fiscal guardrails originally put in place in 2018. The following year, Governor Ned Lamont, a Democrat, proposed a “debt diet” that would shrink borrowing.

Also on Wednesday, state Treasurer Erick Russell said the Connecticut Retirement Plans and Trust Funds reported returns of 10.14% for fiscal 2025, higher than its assumed rate of return.

Connecticut’s “strict” adherence to its adopted financial policies “have led to increased budgetary reserves and consistent pension contributions that have begun moderating the state’s very high unfunded pension liabilities,” Moody’s analyst Denise Rappmund wrote in the report published Tuesday.

The rating firms cited Connecticut’s high income and wealth levels. The state has used excess income-tax revenue to pay down pension debt. Lamont said in a press release that by the end of the year, the state will have made $10 billion in pension payments since he took office in 2019.

Connecticut plans to issue $1.8 billion of general-obligation bonds in the week of Sept. 22, according to the release from Lamont.

–With assistance from Martin Z. Braun.

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