Moody’s: Pennsylvania’s Outlook Remains Negative, Warns of Consequences of Failing to Address Structural Budget Gap

April 12, 2016

Harrisburg, PA – A new Moody’s report has affirmed Pennsylvania’s negative rating. The report cites Pennsylvania’s “negative fiscal position following years of deficits and large structural imbalance” and “poorly funded pension plans and historical practice of underfunding” as chief credit challenges. Furthermore, our “failure to address [the] structural budget gap” could lead to credit downgrade.

“As I have warned for years, we must address Pennsylvania’s structural budget deficit,” said Governor Wolf. “Either we can invest in education, eliminate the deficit, and put Pennsylvania back on track or we can continue on the same path with dire consequences. If we do not act, a more than $2 billion deficit will force cuts to education funding and human services while increasing property taxes for people across Pennsylvania.”

Last month, Moody’s, PNC, and S&P gave similar warnings:

S&P: “The outlook is negative. The negative outlook reflects our view that although the passage of the fiscal 2016 budget lays the groundwork for deliberations on the fiscal 2017 budget, lawmakers still face a projected budget gap for fiscal 2017. 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…”

Moody’s: “Pennsylvania’s 2016 Budget Doesn’t Solve Its Long-Term Challenges: On Wednesday, March 23, Commonwealth of Pennsylvania (Aa3 negative) Governor Tom Wolf said he would not veto the fiscal 2016 budget the legislature had passed, smoothing the way for the budget bill to become law on March 28. This officially ends the stalemate over Pennsylvania’s fiscal 2016 budget, but 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 longer term.”

PNC: .”We do not expect the budget to come close to solving Pennsylvania’s fiscal pressures, including its structural budget gap, which is sizeable and growing. Without broader policy changes, Pennsylvania’s structural deficit will worsen.”

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