UH-OH: The city's not out of the woods yet. Last week, a major credit-rating agency issued a "negative" outlook on Philadelphia's ability to pay back its debt. It's another reminder that the city's plan to deal with the $1.4 billion budget gap has major risks that must be navigated.
The statement, made by Moody's Investor Services, could make it harder for Philadelphia to borrow money. Moody's gives local governments ratings based on perceived ability to repay debt. It's similar to a personal-credit score, but for cities. This doesn't actually change Philadelphia's rating, but could set the stage for such a move in the near future.
Why the negative outlook? Major portions of the budget plan - increasing the sales tax from 7 percent to 8 percent and reducing pension contributions - still require state approval. It's nowhere near certain that lawmakers in Harrisburg will authorize these changes, and failure would mean drastic budget cuts in record time.
Moody's action is another wake-up call to state lawmakers: If they don't act, the repercussions for Philadelphia will be ugly. And what's ugly for Philadelphia sooner or later gets ugly for the state. *