Bankruptcy Looms in many States as CT Connecticut

Hartford Bankruptcy Looms As CT Gov Admits "We Spent Money On Wrong Things"

"We built too many prisons, which we're still paying off even while we're closing them..."

After meeting with Millstein & Co, the same firm that tried to help Puerto Rico reorganize its massive debt burden, State Comptroller Denise Nappier proposed a new tax-secured revenue bond program, which she says will lower borrowing costs and boost reserves. The bonds would be issued in lieu of general-obligation bonds, according to Reuters.

[[  Here the Focus is on Connectic but there are other in worse situation, as show below ]]

But that's a long-term solution. Right now, the state still desperately needs a budget, or its municipalities will be faced with devastating cuts.

“…until lawmakers craft a budget, the state's fiscal uncertainty is causing havoc among municipalities. Some are considering whether to delay the start of school or dip into reserves.

And for Hartford, the longer the state goes without a budget, the closer the city comes to a possible bankruptcy filing, said Hartford Mayor Luke Bronin, a 38-year-old former U.S. Treasury official.

"The lack of a state budget... makes a liquidity challenge come that much faster," he said.”

By some measures, Connecticut has the worst debt problem in the country.

“It has the most net tax-supported state debt per capita in the nation at $6,505, versus a median of $1,006, according to Moody's Investors Service.

It has the highest debt service costs as a portion of state revenues, as well as debt relative to gross domestic product, Moody's said.”

During fiscal 2017, CT spent $2.85 billion servicing debt – the most in seven years.

“The $2.85 billion of principal and interest the state paid on its bonds in fiscal 2017 was the highest in six years, according to preliminary unaudited information from State Treasurer Denise Nappier's office that has not yet been published.”

A crisis at the state level promises to ripple across the state, destabilizing municipalities that have taken state aid for granted for too long.

“Further, the state's budget crunch is threatening its cities including the state capital of Hartford, which is considering bankruptcy due, in part, to its dependence on state aid.

Connecticut has borrowed for decades to fund school construction, whereas nearly all other states typically borrow at the local level for those projects.

Lack of county governments means some other local costs are picked up by the state, including for all of its detention facilities.”

As with many of its troubled peers, Connecticut’s financial struggles began with the crisis.

“Connecticut has piled on debt to bolster its public pensions, selling $2.3 billion of bonds in April 2008.

And again in December 2009, the state sold $916 million of economic recovery notes to close a budget deficit after depleting its rainy day fund during the Great Recession.”

Beyond that, its decline has been hastened by a combination of forces. A deteriorating local economy, coupled with a plunge in hedge fund profits, have strained the state’s already narrow tax base. Meanwhile, high taxes have inspired wealthy hedge fund types to move to states that are more tax-friendly, like Florida.

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Continue reading at http://www.zerohedge.com/news/2017-08-23/hartford-bankruptcy-looms-ct-gov-admits-we-spent-money-wrong-things

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