Illinois isn't the only state dealing with financial headaches these days. Connecticut, too, is facing big budget problems as major corporations flee the state's high taxes and its fiscal future gets murkier by the day.
While Illinois is facing the possibility its credit rating hitting "junk" status, Connecticut has the distinction of the third-worst ratings in the country -- behind Illinois and New Jersey.
S&P Global Ratings, Moody's and Fitch all downgraded the state last month -- which threatens to increase the cost of borrowing -- in what officials described as a "call to action" for state leaders.
“We’ve been downgraded by everybody in the last six months, and in the last year two or three times,” Senate Republican President Len Fasano said. “If we don’t pass a budget, I think we will see a further downward spiral.”
Connecticut, like 15 other states including Illinois, has yet to pass a fiscal 2018 budget—the deadline to do so is June 30.
“We must immediately take the necessary steps to mitigate the current year deficit and then balance the ... budget with recurring measures to reduce spending and structural solutions to our long-term problems,” a spokesperson for the Connecticut Office of Policy and Management said in response to Moody’s downgrade.
Connecticut’s deficit has reached $5 billion. According to an analysis by the Pew Charitable Trusts, the state only has $240 million in its 'rainy day fund' — only five states have a smaller cushion. Much of the financial troubles are tied to the state’s pension system, which two-term Democratic Gov. Dannel Malloy’s office is seeking to address with a new plan to save the state $24 billion in “coming years.”
Malloy wants to require new state employees to be covered under a new hybrid pension system. The agreement, which Malloy’s office made with the state union, is tentative and awaiting legislative approval.
“Connecticut can and will adopt a responsible, balanced budget for the coming biennium—the question is how best to handle our finances until that happens,” Malloy said. He offered a short-term “mini-budget” to allow “more time to negotiate a full budget, without making our current problems any worse and without further jeopardizing the state’s bond rating.”
But Fasano told Fox News the governor’s budget is not seeing support on “either side of the aisle.”
“His proposal decimates municipalities, social services and has no support, so we did our own budget,” Fasano said. “He has really shown the propensity of turning this state in a very negative direction.”
Fasano serves as the State Senate’s Republican president in conjunction with the Democratic president. This is a special situation, as for the first time in decades, the State Senate is split evenly in the historically blue state.
“We are tied, 18-18, and that’s making it more difficult because the Democrats can no longer plow across the finish line a progressive agenda, fiscally speaking—so they can’t figure out what to do,” Fasano said. “Senate Republicans are the only ones with a line-by-line, detailed and balanced budget.”
Fasano claimed the budget put forth by Senate Republicans changes taxes and includes structural provisions that would help keep businesses in the state.
“We are doing things to try to attract people to stay here as best we can, given the fact that we have a $5 billion deficit,” Fasano said. “If we do not pass a budget by June 30, we have sent a message, I think to everyone, that we have no idea what we’re doing, and that is not going to give [comfort] to people to buy or stay here.”
The state has been losing corporations crucial to its economy. Just last month, Aetna Inc. announced negotiations with several other states to move its corporate headquarters. Aetna, the health insurer which has been based out of the state’s capital, Hartford, since 1853, is reportedly exploring a move to Boston or New York.
Hartford has been struggling with a financial quagmire of its own, even meeting last month to discuss the option of filing bankruptcy.
“We know that now more than ever, we are in competition across all industries –not just with Massachusetts or New York state, but more specifically with Boston and New York City,” Malloy said last month.
Malloy said he believed the “vast majority” of Aetna’s almost 6,000 jobs in Connecticut will stay.
Connecticut’s unemployment rate rose to 4.9 percent in April, up from 4.5 percent in January. “Keeping those employees in Connecticut is far more important than where Aetna plants its corporate flag,” Malloy said.
Malloy is looking to boost jobs with the approval this week to begin construction on the state’s third casino.
But Aetna is not the first major corporation to explore exiting -- General Electric left its headquarters in Fairfield, Conn., last year after more than 40 years.
“GE aspires to be the most competitive company in the world,” then-GE Chairman and CEO Jeff Immelt said last year in announcing the move. “We want to be at the center of an ecosystem that shares our aspirations.”
Despite the loss of GE and potential loss of Aetna, Malloy’s office told Fox News that companies like Xerox, Sikorsky, and Vineyard Vines, among others, have committed to the state over the last two years.
But Fasano said he spoke with GE executives before they left and they cited state financial issues.
“They said Connecticut continues to tax at rates that make it unaffordable for businesses, people to stay here and didn’t see what Connecticut looked like seven or eight years from now,” he said. “... That’s the same analysis I’ve heard from a number of businesses as to why they’re leaving. The progressive agenda this governor put forth is now coming home to roost.”