Moody's to Pa.: Balance your budget or face higher borrowing costs
"Absent political compromise"
In advance of Pennsylvania's plan to borrow another $1.2 billion in a July 19 general-obligation bond issue, Moody's has slapped Pennsylvania with another Aa3 bond rating, among the lowest of any state -- and warned it may cut the rating another notch.
So what's the problem? "The Commonwealth is fundamentally capable of solving its problems, but the lengthy political stalemate that delayed the passage of a full-year budget until nine months into fiscal 2016 suggests practical difficulties regaining its footing," and state officials (Gov. Wolf and GOP leaders) are reluctant to put spending programs in balance with tax revenues.
Moody's "Negative Outlook" warning "reflects the likelihood that the Commonwealth's credit challenges are likely to worsen in the near term absent political compromise," along with the state's usual slow economic growth, Moody's added.
"The coming months will be crucial. If the Commonwealth is able to balance the budget, either through revenue increases or expenditure decreases or a blend of each, its credit could stabilize at the current level.
"If not, further budget deterioration" will likely mean a lower credit rating and higher financing costs. Pennsylvanians pay around half a percentage point extra to borrow, compared to AAA-rated, budget-balanced states like Delaware and Maryland.
That drains Pennsylvania taxpayers of tens of millions of dollars a year. New Jersey and Illinois are the only states with worse credit ratings than Pennsylvania.
