KNOCKED DOWN: Moody’s downgraded Pennsylvania’s bond rating Monday, citing pension liabilities and a budget filled with non-recurring revenues as reasons.
By Watchdog.org – Andrew Staub July 22, 2014
That didn’t take long.
Just weeks after Pennsylvania lawmakers passed a patchwork budget and skipped town without addressing pension reform, Moody’s has downgraded Pennsylvania’s general obligation bond rating. It dropped the state fom Aa2 — its third-highest rating — to Aa3.
The move comes after the three major rating agencies issued warnings to the state in advance of the budget season.
Among the reasons Moody’s cited? The state’s “growing structural imbalance, exacerbated by the fiscal 2015 enacted budget that depends on non-recurring resources.”
While Democratic lawmakers had strong complaints about the budget’s reliance on one-time fixes, Republican Gov. Tom Corbett didn’t address that part of Moody’s rationale in a statement issued Monday afternoon. Instead, he focused on the rating agency’s assertion the state’s pension problem contributed to the downgrade.
Moody’s indicated that “large and growing pension liabilities coupled with modest economic growth will limit Pennsylvania’s ability to regain structural balance in the near term.”
The administration’s statement said Pennsylvania’s unfunded pension liabilities are expected to grow from the current $41 billion to $65 billion.