BLOG: Financial Institutions Agree – PA is Facing a Fiscal Cliff (ROUND-UP)

By: Eryn Spangler

March 29, 2016

Governor Wolf announced last week that he would allow the general appropriations and non-preferred appropriations bills sent to him by Republicans to become law, as is, without his signature. However, we still face enormous problems that this budget does not even pretend to address. The math in the Republican budget still does not work and the massive multi-billion dollar deficit is left unaddressed.

One day after Governor Wolf’s announcement, PNC released a statement warning of a potential credit downgrade due to the deficit the budget failed to begin fixing. “We do not expect the budget to come close to solving Pennsylvania’s fiscal pressures, including its structural budget gap, which is sizable and growing,” PNC stated.

The following day, S&P and Moody’s also provided statements stating their concerns that Pennsylvania is on track for a fiscal catastrophe. In their statement, Moody’s said the looming deficit “only brings to the fore a likely new stalemate over the budget for the fiscal year that starts July 1 and ongoing questions over the state’s progress toward structural balance over the long term.”

“The outlook is negative,” S&P’s statement read. “By failing to address long-term structural balance in fiscal 2016, lawmakers have pushed difficult fiscal decisions to the fiscal 2017 budget…Our negative outlook rather reflects our view that the state’s fiscal issues lie in lack of political will to solve them in a timely manner.”

Take a look at the additional coverage below:

Philly.com: Even with a budget, Moody’s sees little hope for Pa.’s finances

“[Moody’s] agency picked apart the 2016 budget, saying it increases spending without approving the governor’s proposed taxes to work toward fiscal balance. Moody’s also criticized the budget’s reliance on nearly $1 billion in one-time funds and said it does not include adequate pension contributions and ‘casts no light on the government’s ability to reach compromise on its long-term fiscal challenges.’”

Public Opinon: Budget tricks are for kids

“In effect the state keeps writing checks it can’t cover. And each year the structural deficit – the gap between spending and revenue (which can’t be filled without new revenue, regardless of economic growth and sensible cuts) – keeps getting bigger. The 2016-17 deficit is shaping up to hit $2 billion.”

Associated Press: Ratings agencies see much not to like in Pennsylvania budget

“’The magnitude of the projected budget gap,’ which the administration estimates at $2 billion for next year, ‘is not insurmountable, in our view, and is not tied to tax base fundamentals’ [S&P] wrote.”

Trib Live: Pennsylvania’s budget woes bring warning from lenders, ratings agencies

“If Pennsylvania’s credit rating is downgraded, the state would have to pay more in interest on borrowed funds because it would incur a greater risk in the eyes of lenders.’It’s simply going to add to the pressure to get a responsible budget enacted,’ said Randy Albright, Wolf’s budget secretary.”

Citizens Voice: State budget hurdles remain

“Wolf warned the budget for 2015-16 is $300 million out of debt and would lead to future downgrades from credit rating agencies. Financial institutions were quick to support his assertions. PNC Bank said that rating downgrades by at least one notch are possible in the near term.”

Associated Press: Moody’s: Pennsylvania $6.6B budget ignores fiscal challenges

“Moody’s said Thursday that while the budget represents an improvement over ‘political gridlock,’ it fails to address the state’s long-term fiscal challenges. ‘The approved budget … casts no light on the government’s ability to reach compromise on its long-term fiscal challenges,’ Moody’s said in a statement.”

PA Homepage: Credit agencies not happy with PA financial status; three agencies warning of credit downgrades

“PNC noted Thursday that ‘without broader policy changes, Pennsylvania’s structural deficit will worsen..’ If the state’s credit rating is downgraded, it will make it more difficult for the state to secure loans, and taxpayers will be forced to pay higher interest rates on the loans the state does secure.”

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