Gov. M. Jodi Rell on Thursday announced she’s ordered more than $34 million in budget cuts under her power to reduce expenditures at executive branch agencies, boards and commissions.

In a news release, Rell said her action is intended to reduce a projected state budget deficit of nearly $400 million.

The release quotes Rell saying the legislature’s adopted budget “has been built on unrealistic savings assumptions (and) I am determined to end this fiscal year in balance, and that requires that action be taken as soon as possible.”

The release says her cuts — called recissions — represent the first of a series of reductions Rell will be making over the next several weeks. It says she will be preparing a deficit mitigation plan that she’ll be presenting to the legislature before Dec. 1.

Rell, it says, has asked her Council of Economic Advisors to brief lawmakers and legislative leaders on Connecticut’s near- and long-term economic outlook at a briefing to be held Nov. 12 at 2:30 p.m. in room 2E in the Legislative Office Building.

The list of Rell’s rescissions can be found at: http://www.ct.gov/governorrell/lib/governorrell/fy10_nov_5th_rescissions_report_final_nc.pdf .

[This story has been updated from its original posting to add remarks from�state Sen. Bob Duff.]

The bond rating agency Moody’s Investors Service announced on Monday it has lowered its outlook for Connecticut’s general obligation bonds from stable to negative. At the same time, the agency said it�held its rating for the state’s outstanding GO bonds — amounting to approximately $12 billion — at Aa3.

The agency released a report describing the factors it used to come up with its negative rating, which included the state’s need to issue deficit bonds to resolve this year’s�budget shortfall, and the non-recurring solutions and deficit financing used to close revenue gaps in the state’s 2010 – 2011 biennial budget.

“Connecticut used one-time solutions to close slightly over half of the (biennial budget’s) shortfall,” the report says, and “these solutions create future structural budget gaps and leave the state with significantly reduced flexibility to address additional fiscal pressures that may arise due to a delayed and/or weaker than expected recovery from the worst economic recession since the depression.”

The state’s�bond rating determines the amount of interest lenders are willing to�pay to purchase its bonds. Moody’s defines Aa3 as ranking in the lower end of the rating for issuers who “demonstrate a very strong creditworthiness relative to other U.S. municipal or tax-exempt issuers or issues.”

Moody’s Aa rating falls within the top third of bonds it judges to be investment grade.

In their report, Moody’s analysts Nicole Johnson and Kimberly Lyons note the state’s general fund balance sheet will weaken as its Budget Reserve Fund (commonly known as the “rainy day fund”) is depleted due to the already sizeable unreserved, undesignated [debt] fund balance the state has carried since the early 1990s, “largely reflecting an accrued liability that has never been repaid.”

At the end of fiscal year 2008, the state’s unreserved, undesignated general fund balance was a negative $1.1 billion, the report says, while by the end of 2010, the Budget Reserve Fund is expected to be depleted.

In response to the report, Gov. M. Jodi Rell sent a letter to the leaders of the General Assembly saying, “Being forced to pay higher interest rates on our bonds would have serious and lasting financial effects in both the near- and long-term.”

Rell said the rating downgrade requires a swift and cooperative response from all branches of state government that must include “a willingness on all sides to make even deeper reductions in state spending than we have to date.”

Rell noted that a decisive factor in the lowered outlook from Moody’s is the excessive use of one-time fixes in the state’s next two-year budget, “especially borrowing and securitization of an as-yet unidentified future revenue stream.”

The two analysts said Connecticut compares unfavorably to other states on measures such as debt ratios “that are among the highest in the nation,” pension funding levels that were among the lowest in the country in 2008 “before the market turmoil is factored,” and other post employment benefit liabilities “that are larger than the size of the state’s annual operating budget.”

They said�while Connecticut’s revenue trends should improve as it emerges from the recession, “as the wealthiest state in the nation, Connecticut is more dependent than most states on high-income earners.” Thus, the uncertain recovery of the nation’s financial markets, they said,�has an “exaggerated impact” on the state’s personal income tax receipts, which account for almost half of the general fund’s resources.”

The report says�Connecticut’s income tax revenue grew by an average annual rate of 12 percent over the 2004 through 2008 fiscal years, but dropped 15 percent in fiscal year 2009. Based on 2007 income year data, the report says, Connecticut’s millionaire residents (those earning at least $1 million) made up less than one percent of the state’s income tax filers, but accounted for 35 percent of the its income collection.

The report identifies Connecticut as being a frequent borrower, and says the state’s debt per capita and debt-to-personal income will likely remain among the highest in the country.

Commenting on�Moody’s decision, Tuesday evening�state Sen. Bob Duff, D-25th Dist., said,�”This letter from Moody’s should be a wake-up call to everyone in the executive and legislative branches,�municipal leaders and special interests from around the state. We are going to have to continue to tighten our belt and restrain spending. It is a time for true leadership and all hands on deck.”

The entire Moody’s report is available on-line at: www.ct.gov/governorrell/lib/governorrell/moodys_report.doc.

Senator Dodd continues to hammer away at issues, intent on driving home the message that he has returned to his origins and is fighting once again for middle class families and consumers who are struggling to make ends meet:

Well Wall Street, as the nickname of all things in the financial market, should be on everyone’s minds these days. �Since the guys who brought us the repeal of�regulatory�provision of the 1933�Glass-Steagall�Act�seem hellbent on looking out for their jolly old good fellas�instead of taxpayer dollars, we’ve been inundated with financial�apocalypse�punditry. And for the record, the guys utmost responsible would be�Larry Summers and Tim�Geithner, currently occupying policy making, or�lack�thereof, at the US Treasury. And the part they repealed, in 1999, under the Gramm-Leach-Bliley Act,�basically�removed�the�law�that prevented banks from owning other financial institutions. Banks being highly regulated, insurance companies being less so.�Let’s look at what�Paul Krugman is saying about the dynamic duo lately:

At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

I weave all these national details together, because it’s important to keep in mind, the track records of those who opine on economic issues. Politics is rife with people who faithfully follow doctrines instead of fearlessly mucking in the swamp gas of policy and issues. And as John Stewart hoisted Jim Cramer on a�media failed to ask questions�pillory, it’s time that the pundits and policy makers start getting held accountable.

Erstwhile parent of the Bristol Press and New Britain Herald, still parent of the New Haven Register, print media death-star and poster child for why Finance is not the uberdiscipline for human endeavor, the Journal-Register Company has filed for protection from its creditors.

The Philadelphia Inquirer published a piece about it from Bloomberg News. Excerpt:

The Journal Register Co., owner of 20 daily newspapers, filed today for bankruptcy protection from its creditors. The Yardley-based company blamed a slump in advertising.

Yeah. It wasn’t that they leveraged the sh*t out of the cash flow they were bleeding from the souls of the people who worked at and subscribed to these publications, in many cases the only or the primary sources of information for their communities. Nah. We didn’t screw this up, it was just a little bad timing. We’ll find somebody else’s sandbox to play in though.

Read more on the story at The New York Times, the New Haven Independent.

BTW, doesn’t this sound like cable dark-lord wannabe Paul Allen’s Charter Communications?:

The company would cancel its stock and become a closely held company, owned by its lenders under a proposed reorganization plan filed in U.S. Bankruptcy Court in New York.

Good riddance, we can only hope.
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The excellent Daily Beast featured a column yesterday by author Edward Jay Epstein. Worth reading if you’d like to know more about how the history we are living happened.

Dick Blumenthal is mentioned in the piece.

Epstein’s thesis is that Buffett himself, because of his position with Berkshire Hathaway, is guilty of profiteering. You don’t hear that sort of critique of Buffett every day. It is not the thrust of the press release from Blumenthal, whose suit is focused on the impact on municipalities. Epstein is taking the rating agencies to task for their actions on the corporate side.

If credit ratings spell out the DNA of our system of risk management, we have a genetic disease on our hands. It explains the virulent nature of what is happening, and suggests the rationale for the market’s continued refusal to value and liquidate the obligations colloquially referred to as “toxic assets”. Continue Reading