Moody's Investors Service has rated Pennsylvania's latest bond issue Aa2 -- better than New Jersey but below Delaware and other "highest-quality" states -- reflecting "Pennsylvania's below-average financial position" due to its "slower" than U.S. average economic growth, the state's resulting "below-average population growth and above-average age," and its "large and growing" underfunding for public-worker pension plans.
Moody's gave the Republican-run state government under Gov. Tom Corbett credit for "three consectuive timely budgets, significantly reduced reliance" on former Gov. Ed Rendell-style one-time budget gimmicks, and a "demonstrated willingness" to cut spending when taxes flowing to state coffers fall below expectations.
But Pennsylvania's financial position and cash on hand "remains weak relative to its historic position," due in large part to the state's "history of significantly underfunding pension contributions," which will force still higher taxpayer contributions to the state workers' and state teachers' pension funds over the next few years, "challenging (Pennsylvania's) ability" to keep balancing its budget or replenish its "depleted" budget reserves, Moody's concluded.