Connecticut’s recent bond rating upgrades are a clear sign that the state’s fiscal guardrails are delivering results. Yet, even as these reforms strengthen our long-term financial outlook, lawmakers continue to test the limits of the very safeguards driving this progress.
Why Bond Ratings Matter
At a September 10 press conference, Gov. Ned Lamont and State Treasurer Erick Russell announced that Moody’s and Fitch upgraded Connecticut’s credit ratings from Aa3 to Aa2 and from AA- to AA, respectively. These ratings place Connecticut in the second-highest credit tier, and they mark the seventh and eighth upgrades since Gov. Lamont took office.
Bond rating improvements are more than symbolic. They reduce borrowing costs, free up resources for taxpayers, and send a signal to employers and investors that Connecticut is a safer place to do business. A stronger fiscal reputation attracts jobs, investment, and, over time, lowers the tax burden on residents.
The Role of Fiscal Guardrails
Treasurer Russell credited Connecticut’s “fiscal controls” with enabling the state to make “significant strides” in reducing unfunded pension liabilities — now down by roughly $10 billion. Gov. Lamont echoed this progress while cautioning that the state is “not out of the woods.” Indeed, Connecticut’s pension system is still only 63.5% funded, well below the national average of 80%, and remains one of the largest per-capita debts in the country — nearly $8,000 per resident.
The progress is no accident, stemming directly from the fiscal guardrails enacted in 2017. These reforms capped spending growth, forced discipline in budgeting, and required surplus revenues to be used for long-term obligations. Since 2020, more than $7.7 billion in surplus has been redirected to pay down pension debt, saving taxpayers millions in interest and an estimated $7 billion over the next 25 years if the rules remain intact.
The guardrails have also fueled a $4.1 billion Rainy Day Fund and made possible the largest income tax cut in state history in 2023. As the Governor’s Economic Report stated, “This tax cut may not have been possible without the enactment of the fiscal guardrails.”
The Temptation to Overspend
Despite this progress, pressures to bypass the guardrails persist. During the last legislative session, lawmakers exceeded the state’s constitutional spending cap for the first time in nearly two decades, citing anticipated Medicaid shortfalls. They also shifted $1.2 billion into off-budget accounts, enabling $2.4 billion more in spending than the guardrails allow.
However, such maneuvers threaten to reverse the very progress that has restored fiscal stability and credibility in recent years.
Connecticut’s Competitive Challenges
As suggested by Gov. Lamont during the Sept. 10 press conference, even with better bond ratings, Connecticut still has a long road toward financial solvency. The state’s economy contracted by 0.9% in the first quarter of 2025, its first decline in over three years. Moreover, Connecticut has yet to recover all the payroll jobs lost in the 2008 Great Recession — one of only three states in that position, along with West Virginia and Wyoming.
National competitiveness rankings reinforce this concern. CNBC’s 2025 Top States for Business ranked Connecticut 28th overall but near the bottom in critical categories: 38th for Economy, 44th for Cost of Doing Business, and 37th for Cost of Living. The Rich States, Poor States report ranked Connecticut 44th in Economic Outlook and 48th in Economic Performance.
Even a recent Connecticut Business & Industry Association’s (CBIA) 2025 survey found 48% of business leaders expect economic stagnation in the coming year, while 91% said the cost of doing business continues to rise.
High taxes, regulatory burdens, and energy costs all play a role. But Connecticut’s struggles also reflect deeper structural weaknesses. Neighboring states like New York and Massachusetts face similar cost pressures, yet their economies are thriving — with rising wages and more robust technology sectors. Connecticut, by contrast, lags in high-skill industries such as data science and IT infrastructure, where competitors are surging ahead.
Staying the Course
Businesses want stability, predictability, and a clear long-term strategy. Bond rating upgrades are an important signal that Connecticut can provide this environment — but only if policymakers resist the temptation to chip away at the reforms that made them possible.
Fiscal discipline must remain the cornerstone of Connecticut’s economic renewal. The guardrails are not a restraint to be worked around; they are the foundation of the state’s rebound. Weakening them in pursuit of short-term gains risks undoing years of progress, worsening affordability challenges, and leaving pension debt unresolved.
Connecticut has a choice: double down on fiscal responsibility and create the conditions for sustained growth or slide back into the instability that once defined its finances. The bond rating upgrades show what works. Now the state must stay the course.
