Malloy Tells Legislators: Mind Moody’s. Three Ways He’s Failing to Mind Moody’s.April 12, 2017
The governor wrote a letter to legislative leaders this week telling them that warnings from Moody's require tough decisions. Is Malloy actually minding Moody's, though?
Gov. Dan Malloy (D-Conn.) wants Connecticut leaders to mind Moody’s and make tough budget decisions. Does he pass the Moody’s test, though?
On Monday, Malloy wrote a letter to legislative leaders telling them that grim outlooks from Wall Street agencies like Moody’s require tough decisions from Connecticut leaders.
That report, issued on April 5, highlights three major problems for Connecticut’s “weak economy” and “high fixed costs”:
- “Connecticut’s high fixed costs limit budget flexibility”
- “The state’s economy has entered a ‘new normal’ of slow job and income growth”
- “Structural changes to improve state budget will hurt downstream entities”
Does Malloy pass the test on fixing any of these three problems?
HIGH FIXED COSTS
Moody’s notes that “payments for debt service, pension contributions and retiree health costs” weigh Connecticut down. As the Yankee Institute pointed out last week, over 1,000 state retirees have pensions north of $100,000 per year.
State employee unions are pressuring the governor and legislature to make no changes to their generous plans, and they may be helped by a state speaker of the House who is a union employee.
Malloy promises $700 million in labor savings in his new budget, but his latest pension deal – struck in January – made no long-term changes. Rather, it kicked pension payments down the road, to Connecticut’s next generation.
SLOW JOB AND INCOME GROWTH
Ironically, Moody’s notes that the Trump administration – with its proposed increases in defense spending – may be good for Connecticut’s economy.
BUDGET IMPACTS ON TOWNS
Malloy told legislators to mind Moody’s, but did he read the full report? At the bottom of the first page, Moody’s notes that Malloy’s plan to pass burdens from the state to Connecticut’s 169 towns will “hurt” these towns.
Moody’s writes: “[T]he proposal would reduce state aid on net to about 130 out of 169 towns in the state, with varying degrees of credit impact.”
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