NEW YORK (Reuters) - S&P Global Ratings downgraded the state of Connecticut on Wednesday, becoming the final of the big three Wall Street credit rating agencies to drop the state into single-A territory because of a huge revenue slump and mounting economic weakness.
Moody’s Investors Service cut the state’s credit rating on Monday, and Fitch Ratings downgraded it on Friday.
That makes Connecticut one of the lowest-rated states in the country, with Fitch and Moody’s ranking only Illinois and New Jersey worse. For S&P, Connecticut is now rated A+ with a stable outlook, fourth worst behind Kentucky.
Connecticut Governor Dannel Malloy on Monday proposed slashing more expenses to help close a $390 million budget shortfall. He previously said the state would also need to drain its reserve fund and sweep in one-time revenues from other funds.
He and lawmakers are hashing out the state’s next two-year budget, which is due by the end of this fiscal year on June 30.
“The governor and legislative leaders are responding to the same information as the credit rating agencies by acting quickly and earnestly to present balanced budget proposals for FY18-19 that rely on real solutions,” Chris McClure, a spokesman for Malloy’s budget office, said in an email.
“By making the difficult decisions now, the state can provide predictability and stability for years to come, thereby fostering economic growth and assuaging credit rating concerns,” he said.
Among the proposed cuts is aid to local governments. Slashing local aid will provide relief to the state but pressure the finances of weaker cities, according to Municipal Market Analytics.
The city of Hartford, Connecticut’s capital, is facing its own deficit and has been in talks with bankruptcy lawyers about possible representation, according to local news reports.
“If the governor’s budget or something similar is enacted, the ratings on [Connecticut] municipalities will reasonably be more volatile in the coming years,” MMA analysts wrote in a note on Monday.
Reporting by Hilary Russ; Editing by Meredith Mazzilli