Wealthy Connecticut Can't Tax its Way to Stability

By Jeffrey M. Frank @ Shutterstock.com

For years Connecticut’s cities have been relying on a morphine drip of state aid to get their books balanced. But now the state itself can’t afford to hand out all that aid and the drip is coming to an end. The state’s capital city Hartford, as I have written, is on the verge of bankruptcy.

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Connecticut has borrowed and spent, and raised taxes and spent, with no thought to fiscal restraint. The assumption might have been that Connecticut’s vast hedge fund wealth would always be available to bail the state out, but that reality is fading as more hedge funds leave the state for greener (and more profitable) places.

Now Reuters reports that Connecticut’s debt levels are the worst in the country, despite its wealthy population. Hilary Russ writes:

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.

By many measures, Connecticut’s debt levels are the worst of the 50 U.S. states.

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.

Connecticut was downgraded by all three major Wall Street credit rating agencies in May.

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.