HARTFORD, Conn. — Connecticut Gov. Dannel Malloy should not invoke Wall Street in discussions about the state budget deficit, said a Republican legislative leader.
“It is not Wall Street that is causing our financial problems, it’s the fact that the state budget was built on false assumptions and was in deficit as soon as it was enacted,” said state Sen. Len Fasano, R-North Haven.
Democrat Malloy on Monday cited Wall Street volatility while acknowledging an additional $121 million shortfall to Connecticut’s $40 billion biennial budget. In a letter to state Comptroller Kevin Lembo, budget Director Benjamin Barnes referenced “the impact of stock-market volatility” on a revenue drop.
In late September, Malloy cut $103 million from the budget, mostly to hospitals and Medicaid.
Bond rating agencies have sent mixed signals about Connecticut.
Fitch Ratings in July removed the negative outlook on its AA rating of Connecticut's general obligation, revising it to stable. Standard & Poor’s in March assigned a negative outlook to its AA rating.
Moody’s Investors Service rates Connecticut’s general obligation bonds Aa3. Kroll Bond Rating Agency assigns its AA rating.
“I don’t think they’re as bad as Pennsylvania,” said Alan Schankel, managing director at Janney Capital Markets in Philadelphia. Pennsylvania is four months late with its fiscal 2016 budget, with Gov. Tom Wolf and lawmakers still far apart.
Schankel said Connecticut’s finances interweave with Wall Street through proximity to New York City. Several investment firms operate out of Fairfield County, less than an hour’s commute from Manhattan.
“I hate to use the word ‘overly,’ but yes, by nature they are exposed to Wall Street volatility,” said Schankel.
Malloy called for bipartisan talks about how to fill the gap, which raised the specter of a special legislative session this fall.
Partisan sniping, meanwhile, has intensified.
“I actually expected them to put something on the table, so I guess I’m calling their bluff,” Malloy told reporters.
According to Fasano, the deficit may run up to $400 million by the end of the fiscal year.
“If we’re going to do this, we’re going to do it right,” said Fasano. “If we’re going into a room, we’re going to determine what the real deficit is.”
