Pennsylvania receives long-awaited credit downgrade
The downgrade means it will be more expensive for the commonwealth to borrow money when it issues or refinances bonds. (Photo by AP)
(Harrisburg) — After months of warnings, S&P Global Ratings has downgraded Pennsylvania’s credit, citing concerns over its chronically unbalanced budget.
The lower rating comes as lawmakers struggle to agree how to close a $2.2 billion funding gap.
It’s now more expensive for the commonwealth to borrow money–a cost that could fall to taxpayers.
S&P’s report cites a litany of concerns about Pennsylvania’s finances, including a nearly decade-old structural deficit, habitually late budgets, and recent failures to make mandatory payments on time.
The downgrade from a double-A-minus rating to an A-plus rating means that while the commonwealth can still meet its obligations, its ability is more fragile now, and more susceptible to economic fluctuations.
The change puts Pennsylvania’s credit rating firmly within the bottom five in the country.
S&P analyst Carol Spain said the commonwealth’s budgets rely far too much on one-time revenues.
“We look at structural balance,” she said. “Do ongoing revenues meet ongoing expenditures? What we’ve seen is that typically, the budgets are not balanced.”
Governor Tom Wolf, the GOP-controlled Senate, and House Democrats all agree with S&P’s concerns. In statements, they said the legislature should compromise soon on a budget with stable funding.
House Republicans–who have held out alone against plans that would raise taxes–pushed back, calling S&P analysts “a small group of unknown people” who are making their rating decision based on “interviews with a governor and press releases from the state’s fiscal officers.”
They said the Treasury should let the state keep spending despite the funding gap, because “revenue is still coming in.”
Spain said the S&P’s rating isn’t based on press releases.
“We have a set of criteria that we use for all of our state ratings, and we look at the data presented to us and evaluate the finances,” she said. “To us, this signals a lower rating.”
Governor Tom Wolf said if budget negotiations haven’t progressed by next week, he’ll “be forced to take further steps to manage this situation.”
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