Moody’s Investors Service announced plans to review the ratings of 26 Connecticut cities and towns and three Connecticut regional school districts for downgrade, impacting approximately $3.5 billion in outstanding debt.

Moody’s has also assigned negative outlooks to ratings of an additional 25 Connecticut cities and towns plus three regional school districts, affecting approximately $3.45 billion in additional outstanding debt.

Three Fairfield County municipalities – Bridgeport, Shelton and Stratford – were among the targets of Moody’s review, which the ratings agency attributed to the absence of a state budget and Gov. Dannel Malloy’s executive order that gives his office control of state spending until a budget is passed.

“Under the executive order currently in effect, state funding of local governments is lower than it was in the last fiscal year by a total of $928 million,” Moody’s said in a statement. “Historically, the state of Connecticut has provided significant funding to its local governments, largely in the form of education cost-sharing grants, but also in the form of payments in lieu of taxes and other smaller governmental grants. The current budget impasse highlights the ongoing vulnerability of funding that the state of Connecticut provides to its local governments.”

Moody’s also noted that Connecticut’s local governments “have unlimited property tax flexibility giving them legal authority to make up for lost state funding with supplemental tax levies to be collected over the balance of the fiscal year,” as well as the ability to save money through personnel and services reductions.

“The reviews for downgrade and ongoing consideration of negative outlooks announced herein will focus on concrete steps taken to replace lost state funding with new revenues and to reduce costs to bring them in line with reduced revenues,” Moody’s said.