Fitch has assigned an 'AA' rating to $200 million in
general obligation (GO) bonds, 2006 series B. The bonds are due May 1,
2007-26, and are scheduled to sell via syndicate led by Bear, Stearns
& Co. on May 18. The bonds will be callable beginning May 1, 2016, at
par. Fitch also affirms the 'AA' rating on $8.9 billion outstanding GO
bonds.
Connecticut's wealth and economic resources continue to support the state's high credit quality. Total personal income growth and per capita personal income growth continue to surpass the U.S., with Connecticut ranked first among the states in personal income per capita. Employment grew 0.3% in 2004 and 0.8% in 2005, after declining during the recession, but remains below the pre-recession peak. The state's financial posture is improving with the economy, with fiscal 2006 revenues to date outpacing earlier, conservative estimates. The state's fiscal 2007 revised budget, just passed, foresees a fiscal 2006 surplus of approximately $675 million, or 4.6% of general fund revenues, of which $246 million will be dedicated to teacher pension funding and $86 million to paying down remaining deficit notes issued during the recession.
Debt levels are high, at 7.9% of personal income and $3,773 per capita, including planned issuance of bonds. Amortization of general obligation debt, about 70% of the net tax-supported total, is rapid, with 68% paid in 10 years. Debt levels are expected to remain high; after approving a significant transportation infrastructure program last year, the legislature this year approved a $2.3 billion, 10-year plan to be funded largely by borrowing. The new plan will establish a commuter rail link between New Haven and Springfield, Massachusetts, and fund other statewide rail and road improvements.
After an extended period of strong financial operations during the 1990s, weakness in the personal income tax resulted in a $1.2 billion budget gap in 2002. It was accommodated through depletion of reserves and $222 million in deficit funding notes. In fiscal 2003, although revenue and spending measures were taken, tax yields remained soft and ultimately a deficit of about $97 million was funded. Personal income tax began to recover in 2004 and continued strongly in 2005, resulting in a 2005 year-end budget reserve balance of $606 million, and allowing the state to forward fund a large portion of debt service on deficit funding notes.
Strength in personal income, corporate, and oil company taxes has continued into 2006. The fiscal 2007 budget revision projects a 2006 surplus of $675 million and a year-end budget reserve balance of $795 million, or 5.4% of general fund appropriations, below the statutory 10% level. In spite of using part of the surplus for teachers' retirement, pension system underfunding remains a pressing concern, with 2004 funding levels at 55% for state employees and 68% for teachers. The 2007 budget also lowers general fund revenues $218 million, $126 million through tax cuts and credits, including elimination of the corporate business tax surcharge enacted in the last recession. After growing 1.3% in fiscal 2006, net general fund spending now is expected to rise 5.3% in fiscal 2007.
Economic performance has improved since the recession, albeit with slow job growth. Employment increased 0.3% in 2004 and 0.8% in 2005, and was up 0.8% in March 2006 compared to the same month the previous year. Personal income improvement has been more pronounced. After declining in 2002 and increasing only 1.2% in 2003, personal income growth accelerated 6.5% in 2004, or 109% of the U.S. increase, and an additional 5.9% in 2005. Personal income per capita, at 138% of the U.S., remains the highest in the nation.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Connecticut's wealth and economic resources continue to support the state's high credit quality. Total personal income growth and per capita personal income growth continue to surpass the U.S., with Connecticut ranked first among the states in personal income per capita. Employment grew 0.3% in 2004 and 0.8% in 2005, after declining during the recession, but remains below the pre-recession peak. The state's financial posture is improving with the economy, with fiscal 2006 revenues to date outpacing earlier, conservative estimates. The state's fiscal 2007 revised budget, just passed, foresees a fiscal 2006 surplus of approximately $675 million, or 4.6% of general fund revenues, of which $246 million will be dedicated to teacher pension funding and $86 million to paying down remaining deficit notes issued during the recession.
Debt levels are high, at 7.9% of personal income and $3,773 per capita, including planned issuance of bonds. Amortization of general obligation debt, about 70% of the net tax-supported total, is rapid, with 68% paid in 10 years. Debt levels are expected to remain high; after approving a significant transportation infrastructure program last year, the legislature this year approved a $2.3 billion, 10-year plan to be funded largely by borrowing. The new plan will establish a commuter rail link between New Haven and Springfield, Massachusetts, and fund other statewide rail and road improvements.
After an extended period of strong financial operations during the 1990s, weakness in the personal income tax resulted in a $1.2 billion budget gap in 2002. It was accommodated through depletion of reserves and $222 million in deficit funding notes. In fiscal 2003, although revenue and spending measures were taken, tax yields remained soft and ultimately a deficit of about $97 million was funded. Personal income tax began to recover in 2004 and continued strongly in 2005, resulting in a 2005 year-end budget reserve balance of $606 million, and allowing the state to forward fund a large portion of debt service on deficit funding notes.
Strength in personal income, corporate, and oil company taxes has continued into 2006. The fiscal 2007 budget revision projects a 2006 surplus of $675 million and a year-end budget reserve balance of $795 million, or 5.4% of general fund appropriations, below the statutory 10% level. In spite of using part of the surplus for teachers' retirement, pension system underfunding remains a pressing concern, with 2004 funding levels at 55% for state employees and 68% for teachers. The 2007 budget also lowers general fund revenues $218 million, $126 million through tax cuts and credits, including elimination of the corporate business tax surcharge enacted in the last recession. After growing 1.3% in fiscal 2006, net general fund spending now is expected to rise 5.3% in fiscal 2007.
Economic performance has improved since the recession, albeit with slow job growth. Employment increased 0.3% in 2004 and 0.8% in 2005, and was up 0.8% in March 2006 compared to the same month the previous year. Personal income improvement has been more pronounced. After declining in 2002 and increasing only 1.2% in 2003, personal income growth accelerated 6.5% in 2004, or 109% of the U.S. increase, and an additional 5.9% in 2005. Personal income per capita, at 138% of the U.S., remains the highest in the nation.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.