BLOG: S&P Threatens Pennsylvania With a Downgrade Due to Our Budget Deficit
By: Jeffrey Sheridan, Press Secretary
March 07, 2016
Last week, Standard and Poor’s Ratings Services cited Pennsylvania’s structural budget imbalance as the primary reason that the commonwealth’s AA-minus general obligation rating could be downgraded by the end of March.
Governor Wolf has warned for years that Pennsylvania’s $2 billion plus budget deficit is a time bomb, ticking away. If it explodes, Pennsylvania will experience a fiscal catastrophe the likes of which we have never seen.
Last week’s S&P downgrade warning is a stark reminder of the consequences of failing to address Pennsylvania’s budget deficit. It’s time to pass a budget that addresses the budget deficit and fully funds our schools and other key services.
Key takeaways from the report:
- “We believe that the failure of lawmakers to agree on a complete budget package for fiscal 2016 in the coming weeks would impair their ability to address the projected fiscal 2017 budget gap in a timely manner. If the legislature and governor do not enact a fiscal 2016 budget that addresses structural balance by the end of the March sessions, we will likely lower the rating. On the other hand, if lawmakers do agree on a budget that addresses long-term structural balance in this timeframe, we could revise the outlook back to stable.”
- “The $30.3 billion budget passed by both the house and senate is, in our view, structurally unbalanced and does not include pension reforms negotiated in the previously agreed-on budget framework. As proposed, the budget had a $510 million budget gap for fiscal 2016 and left a $2.2 billion budget gap for fiscal 2017. It did not include a previously proposed revenue increase package and relies on $46.6 million of one-time revenues in fiscal 2016. Increases to basic education funding in House Bill 1460 were less than the budget compromise bill, and, when including cuts to school construction, it cut $95 million to education.”
- “In our view, the immediate credit concern is that failure to act in the current fiscal year could compound future fiscal gaps.”
Read more posts about Governor Wolf’s 2016-17 budget.
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