S&P Global Ratings has taken Pennsylvania off "CreditWatch," its list of likely credit-rating downgrades, after Gov. Wolf signed this year's budget "in a relatively timely manner," compared to the state's usual long delays, writes S&P analyst Carol Spain in a report to clients.

Plus, the state is still rich enough to afford tax increases to pay for popular spending programs, which legislators have been unwilling to cut, she added.

(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. The premium for Pa. is about half a percentage point; N.J. is close to 1 percent. Since Pennsylvania is paying interest on billions in bonds, that adds up to millions a year. If the bond rating gets cut again, taxpayers will have to pay higher interest.)

The less-bad listing "follows the passage of a revenue package" and spending plan," Spain wrote. "However, we have assigned a negative outlook because we view the fiscal 2017 budget as structurally imbalanced and believe that many of the revenue assumptions could prove optimistic.

"We have not lowered our rating at this time because we estimate that the size
of the structural gap is just $475 million, or 1.5% of the budget. Given the
small gap, coupled with the achievement of full funding of actuarially
determined contributions for all pension plans in fiscal 2017, we see
the fiscal 2018 and projected out-year budget gaps as manageable, albeit
likely to face similar political obstacles."

"Despite slow economic growth in recent years, Pennsylvania's economic profile remains diverse and has wealth to support potential tax increases," Spain wrote.

"Although general fund and rainy day reserves have been depleted," the state is still meeting its cash flow needs.

"The Commonwealth's 58% overall pension funded ratio," assets/obligations, "indicates high fixed costs tied to pension payments over the next decades, but compared with lower-rated peers" -- mostly New Jersey and Illinois -- the fact the state is finally funding its pension plans at its annual minimum after years of underpayment is a good sign.

Harrisburg is not out of the woods yet: "Failure to address the balance during
periods of revenue growth adds to the challenge of addressing unexpected
revenue shortfalls," she concluded. S&P will cut Pennsylvania's credit rating if the deficit, borrowing, or the already-large pension deficit increases significantly over the next two years.