Connecticut delayed a $233 million note financing yesterday, as lawmakers appeared ready to end a long impasse over whether to impose an income tax.
Benson R. Cohn, assistant treasurer for debt management, said the state had decided that until a budget had been adopted, it would put off the note pricing.
"It's better to see if we have a budget before we do it," Mr. Cohn said. Resolving debate over the current fiscal year plan could help the state achieve a lower borrowing cost on the notes, he said.
The second-lien special tax obligation bond anticipation note deal is part of a 10-year, $7.3 billion infrastructure renewal program backed by a gasoline tax and other revenues associated with motor vehicle use. The Bans mature Dec. 30 and are noncallable.
Connecticut's treasury had decided to issue notes, rather than bonds, after it became clear that a fiscal plan would not be available in time for the financing.
Mr. Cohn said that even if the budget battle does end this week, the state would still probably issue the Bans, rather than switch to a bond financing.
Changing plans at this point would be "difficult," he explained, "because it takes a meeting of the bond commission to approve the supplemental indenture for bonds, and there isn't a meeting scheduled yet."
The state was also forced to issue general obligation bond anticipation notes, rather than long-term debt, early this month, when it borrowed $320 million short-term.
As the state's last fiscal year came to a close in June, Treasurer Francisco L. Borges warned lawmakers against a dilatory approach to the fiscal 1992 budget. He said delay would force the state to issue more costly short-term debt because bonds could not come to market without a budget in place.
But lawmakers took their time in a debate that has raged since February, when Gov. Lowell P. Weicker Jr. stunned lawmakers by saying only an income tax would end the state's snowballing budget deficits.
Connecticut's last dalliance with an income tax was in the early 1970s, when lawmakers, cowed by a public uproar, repealed the tax after a matter of weeks.
The governor vetoed a succession of proposed budgets that did not include income taxes, and the lawmakers could never muster enough votes to override the votoes.
By this week, a majority in both chambers of the legislature stood ready to approve an income tax plan last last night or early this morning, sources said.
Even so, Gov. Weicker was not counting on seeing a budget on his desk by today, according to Avice A. Meehan, the governor's press secretary. "It hasn't passed yet," Ms. Meehan said. And, she added, delays continued to dog the budget process. "We're operating six to eight hours behind schedule."
Such added tardiness seemed minor, however, given that the debate over a fiscal plan had taken up nearly one-sixth of the period for which the plan was being developed.
According to Steven Hochman, a vice president and assistant director at Moody's Investors Service, the long delay has added to the state's budget gap.
Since its fiscal year began July 1, the state has been collecting revenue through a string of temporary resolutions extending the existing sales tax-based formula.
That formula, according to State Comptroller William Curry, would result in a deficit of at least $3 billion by the end of the current fiscal year.
"In the seven weeks or so that the legislature has allowed the state to operate without a budget," Mr. Hochman said, "the state has collected less than it spent. We need to see how much larger the deficit has grown."
He also said that Moody's would examine the budget accord to see how it deals with any increase in the state's budget gap. "We are waiting to get some detailed information on how the budget is put together and what the revenues and expenditures are expected to be." The agency assigns an Aa rating to the state's general obligation bonds.
Standard & Poor's Corp. rates the state's GO bonds AA, but has placed them on CreditWatch with negative implications. "We'll review the situation at the time the budget is passed," said Richard Marino, a vice president at the rating agency.
But, he added, "the longer they delay it, the more serious the problem becomes. If this continues, we might take a look at [the state's ratings] before they pass the budget."
Mr. Cohn said the state had not yet asked the rating agency if the CreditWatch listing would end with the passage of a sound fiscal plan.
"Once we have something to report to them, and we think it's good, we will certainly ask," Mr. Cohn said. "Meanwhile, we are holding our collective breath."
