S T A T E OF C O N N E C T I C U T

OFFICE OF POLICY AND MANAGEMENT

Contact: Gian-Carl Casa (860) 478-1756

July 2,2013

Bond Ratings Retained By All Four Major Credit-Rating Agencies

OPM Secretary Ben Barnes today responded to actions taken in recent days by the state's four rating agencies in anticipation of its upcoming issuance of $200 million of General Obligation Bonds. Moody's, Standard & Poor's and Kroll affirmed their existing ratings of Aa3 (Moodys) and AA (S&P, Kroll), all with stable outlooks. Fitch also retained their AA rating, but changed the outlook for the state's general obligation debt to negative. Barnes said, I am pleased to see that our double-A ratings have all been retained by the major rating agencies. Fitchs concerns about our vulnerability to continued economic weakness are reasonable, but ultimately not so great as to change our high-quality rating. They have affirmed that our revenue forecasts are reasonable, that our budget is balanced, and that our bonds continue to be an extremely safe investment in line with our AA rating. The state continues our commitment to responsibly addressing our significant long-term liabilities. Unfortunately, our considerable economic strengths, including high incomes, high levels of education, strong property values and high productivity, have been mitigated by the long, sluggish recovery from the national recession. While we have made significant progress in addressing pension liabilities, have implemented GAAP, and have begun to make deposits into the rainy day fund, a slower than expected recovery due in large part to inaction in Washington no doubt weighed heavily in Fitch's decision to change the state's rating. This administration's commitment to responsible financial management and gradual resolution of our long-term liabilities remains strong. We look forward to the opportunity to incorporate the guidance and criticisms of all the rating agencies in our policy recommendations in the coming year. I am optimistic that continued progress on economic recovery, coupled with continued prudent management actions by the state, will lead to the prompt restoration of our stable outlook." The state's ratings remain in line with our neighboring states -- the same or slightly below New York , Massachusetts and Rhode Island, and better than New Jersey. The slight variation among these states is principally driven by the funding condition of and contributions to their respective pension plans. While Connecticut's plans remain significantly underfunded, recently implemented changes in how we calculate annual payments will allow for significant progress toward full funding over the coming years. According to Fitch, Rating Outlooks indicate the direction a rating is likely to move over a one- to two-year period. They reflect financial or other trends that have not yet reached the level that would trigger a rating action, but which may do so if such trends continue. In this case, Fitch pointed to reduced fiscal flexibility at a time of lingering economic and revenue uncertainty. There are currently 14 states and the District of Columbia that have been assigned a negative outlook by one or more rating agencies. -30-

Summary and Explanation of Rating Agency Actions

In connection with the upcoming sale of general obligation bonds

July 2013 Ratings All four rating agencies reaffirmed existing state ratings of general obligation bonds as follows: 1. Fitch AA 2. Moodys Aa3 3. S&P AA 4. Kroll AA Outlook As part of the ratings process, agencies also assign an outlook. Three of the four agencies reaffirmed their existing outlook for the state: 1. Moodys Stable 2. S&P Stable 3. Kroll Stable Fitch lowered their outlook from Stable to Negative. This change in outlook is not expected to increase the states borrowing costs as this is not a downgrade to the states ratings . According to Fitchs own definition, Rating Outlooks indicate the direction a rating is likely to move over a one - to two-year period. They reflect financial or other trends that have not yet reached the level that would trigger a rating action, but which may do so if such trends continue. Nonetheless, the state takes seriously changes in the outlook designation and views them as an opportunity to incorporate any guidance and criticisms in developing policy recommendations in the coming year.

OPM , 7/2/13