Budget friction is far from over in Connecticut, where a $40.3 billion biennial budget awaits Gov. Dannel Malloy's expected signature.
Still resonating are the calls from corporate behemoths General Electric Co. and Aetna Inc. to possibly move out of state because of a projected $2 billion increase in income and corporate taxes. Boehringer Ingelheim Pharmaceuticals Inc. and Travelers Cos., also large employers, expressed similar frustration.
"People with employees in their district have got to be running scared," said state Sen. Scott Frantz, R-Stamford. "This is the first time in my seven years that people are really paying attention to what's going on in Hartford. Companies like GE and Aetna have the right to be heard."
The budget votes shortly after midnight on June 4 - a day after the General Assembly pulled an all-nighter -- reflected the narrow Connecticut majority: 73-70 in the House, 19-17 in the Senate.
Franz worries that Connecticut's budget problems - the General Assembly's nonpartisan state Office of Fiscal Analysis projects an $832 million shortfall for 2017-18, the first fiscal year after the new budget - could further resonate with bond rating agencies.
"At some point, all the credit rating agencies have to take a closer scrutiny with regard to our budget actions," said Frantz.
Moody's Investors Service rates Connecticut's general obligation bonds Aa3. Fitch Ratings, Standard & Poor's and Kroll Bond Rating Agency rate them AA. S&P in March revised its outlook on state GO debt to negative from stable. Fitch also has a negative outlook, while Kroll and Moody's assign stable outlooks.
Bond ratings have triggered partisan bickering in Connecticut. In January 2012, when Moody's lowered Connecticut to Aa3 from Aa2, Malloy, fellow Democrat and state Treasurer Denise Nappier, and state budget Director Benjamin Barnes all lambasted Moody's. State Senate Republicans, including Frantz and then-minority leader Scott McKinney, R-Fairfield, defended the rating agency.
Nappier, who once sued the big three over how they calibrate municipal bond ratings and won a settlement, added Kroll to the mix late in 2011. It was Kroll's first state credit.
The budget bill requires automatic deposits to Connecticut's budget reserve fund whenever the most volatile tax revenue streams - the estimated and final payments portion of the income and corporate taxes - produce revenues above historic norms. State Comptroller Kevin Lembo had pushed for the provision, which also raises the budget reserve fund cap from 10% t of net general fund appropriations to 15%.
Malloy, meeting with reporters after the budget passage, touted the increased funding levels for transportation -- $2.8 billion over five years, $10 billion with bonding and federal funding added to the mix.
On hold are his plans to divert half a percent from the state sales tax to a special transportation plan, and create a lockbox to prevent raids.
