HARTFORD, Conn. – A ratings agency has maintained Connecticut's debt rating as negative, saying the state's budget relies on one-time fixes and calling the state's economic recovery "slow and uneven."
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The analysis by Fitch Ratings released Tuesday said the General Assembly relied on one-time items such as shifting millions of dollars from last year's surplus into the budget that took effect July 1.
"The negative outlook reflects the state's reduced fiscal flexibility at a time of lingering economic and revenue uncertainty," the ratings agency said.
Benjamin Barnes, Gov. Dannel P. Malloy's budget adviser, said agencies reaffirmed Connecticut's debt ratings while downgrading ratings at other states "across the board."
"We know there's more to do and we will continue our prudent fiscal management," he said.
The decision by lawmakers and Malloy to deposit $400 million in the rainy day fund and fully funding Connecticut's pension obligations will help increase the ratings, he said.
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Fitch said the state's budget troubles are tied to Connecticut's weak economy, which generates revenue from personal and corporate income taxes, fees and other sources.
"Economic recovery has been slow and uneven since the recession and the state's large and important finance sector continues to weaken," the ratings agency said.
Connecticut's personal income tax collections are volatile, making revenue forecasts difficult, it said. Revenue in the first half of the 2014 budget year surged, with solid year-over-year gains in personal income tax collections that prompted the state to raise its forecast expectations, Fitch said. But after lower income tax collections in the spring, the state cut its forecast for revenue growth, it said.
Fitch's view stands in contrast with Malloy's argument that he's avoiding budget gimmicks, such as delaying payments and borrowing, to balance the state budget.
The current budget relied on "one-time measures" to achieve narrow forecast surpluses in the 2014 budget year and next year, the ratings agency said. The state moved $221 million from last year's surplus into the current budget, shifted money between the transportation and general funds and delayed starting paying down a deficit to convert to a generally accepted accounting procedure for the state budget, Fitch said.