Moody’s Upgrades Pennsylvania’s Intercept Program
August 17, 2016
Harrisburg, PA – Governor Wolf today announced that Moody’s Investors Service has upgraded Pennsylvania’s school district pre-default enhancement program, or intercept program. Moody’s also revised its outlook on the program to stable from negative. This will allow school districts to issue debt at lower costs and save taxpayers money. Moody’s upgrade follows the rating agency’s recent announcement that it has revised Pennsylvania’s overall financial outlook to stable from negative as a result of the successful completion of a balanced 2016-17 budget that includes sustainable, recurring revenue to reduce the structural budget deficit.
“As a result of the bipartisan, compromise budget that is balanced and includes sustainable and recurring revenue, the commonwealth’s financial outlook continues to improve,” said Governor Wolf. “We still have work to do, but when I came into office Pennsylvania was facing a structural budget deficit of more than $2 billion, and working together we have made significant progress reducing it. I look forward to continuing to work with Republicans and Democrats in the legislature to fix the commonwealth’s structural deficit and move Pennsylvania forward.”
Moody’s latest actions coincide with S&P’s announcement that it has removed the commonwealth from CreditWatch:
“S&P Global Ratings has taken Pennsylvania off ‘CreditWatch,’ its list of likely credit-rating downgrades, after Gov. Wolf signed this year’s budget… Who cares what S&P thinks? The people, for example Wall Street investors, who lend Pennsylvania money: Borrowers with lower credit ratings, like New Jersey and Pa., have to pay higher interest to get bondholders to finance their debt, compared to higher-rated states like AAA-rated Delaware and Maryland… If the bond rating gets cut again, taxpayers will have to pay higher interest.” [Inquirer, July 19, 2016]
This also follows the commonwealth’s successful sale of a $1.2 billion bond to support capital projects, including infrastructure projects. Pennsylvania’s recent bond sale received strong interest from 6 banks and the winning bidder, Bank of America Merrill Lynch, had a 2.75 percent True Interest Cost, which is lower than expected.
“Over the long term, this bond sale will save hardworking taxpayers money,” said Governor Wolf. “This is proof the market clearly recognizes that the commonwealth has turned the corner and begun to place itself on stronger financial footing.”
In today’s announcement regarding the commonwealth’s intercept program, Moody’s also raised the maximum rating on school district bonds, and increased the maximum uplift.
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