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Gov. Malloy and Treasurer Nappier Announce State Finalizes Payment on $1.09 Billion in Debt from Economic Recovery Notes Issued by Prior Administration

(HARTFORD, CT) – Governor Dannel P. Malloy and State Treasurer Denise L. Nappier today announced that the State of Connecticut has fully paid the outstanding liability related to the Economic Recovery Notes that were originally issued during the administration of Governor M. Jodi Rell in 2009. At that time, the state borrowed money to cover its operating expenses when it closed the fiscal year with a deficit of more than $900 million and a depleted rainy day fund.

“Completing payment on the Economic Recovery Notes closes a regrettable chapter in Connecticut’s financial history,” Governor Malloy said. “Surely, reasonable minds agree that we must avoid repeating this costly decision. It is my sincere hope that present and future state leaders learn from this experience and take the necessary steps to keep the budget in balance during the course of the fiscal year. Rather than creating more debt that will strain budgets into the next decade that already include forecasted deficits of billions of dollars, prompt and prudent action should be taken to resolve our current deficit projection in FY18.”

“It is always good news when we are able to retire state debt, but we must remember why we incurred this debt in the first place,” Treasurer Nappier said. “Keeping the budget balanced and building up the budget reserve fund remain daunting tasks but ones we must adhere to. We must employ innovative ways to address the state’s fiscal problems, such as the recently adopted tax-secured bonding program, which my administration proposed as a way to earn higher credit ratings and to lower borrowing costs while rebuilding the reserve fund.”

In 2009, Governor Rell and the General Assembly were confronting a deficit of more than $900 million while the state and national economy were in the midst of the Great Recession and they were unable to come to an agreement to mitigate the deficit within the fiscal year. Concurrently, there were zero dollars remaining in the budget reserve fund, leaving the Economic Recovery Notes as the only means in which Connecticut could close the deficit. The bonds were originally authorized through June Special Session Public Act 09-2.

The final payment on the debt was completed on January 1, 2018. The State of Connecticut paid a total of $1.09 billion, which included $923.8 million of principal and $166.3 million in interest over the course of repayment. During this period, the bonds were refinanced in two separate instances, the first in 2013 and again the following year. The refinancing of the debt lowered the interest costs from $170.1 million to $166.3 million and extended the repayment period from 7 years to just over 9 years. These changes allowed the state to lower its annual payment to approximately $178 million from a projected $208 million.
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