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Moody’s Downgrades Pennsylvania’s Credit Rating

110810_moodys_ap_605Credit rating agency Moody’s decided to downgrade Pennsylvania’s rating from Aa2 to Aa3 on its $11.1 billion in general obligation bonds.

A statement from Moody’s explains why the downgrade was necessary: “The downgrade of the general obligation rating to Aa3 reflects the commonwealth’s growing structural imbalance, exacerbated by the fiscal 2015 enacted budget that depends on non-recurring resources; a weak GAAP [generally accepted accounting principles] balance position that will further deteriorate based on the budget’s one-time measures; and the expectation that large and growing pension liabilities coupled with modest economic growth will limit Pennsylvania’s ability to regain structural balance in the near term.”

Gov. Tom Corbett, who at first refused to sign the state budget proposal without significant pension reform, seemed vindicated by Moody’s criticism.

“It’s clear that this pension crisis has put severe strain on Pennsylvania’s finances,” Corbett said. “As families struggle with skyrocketing property taxes, pension costs are consuming more than 60 cents of every new dollar of state general fund revenues. Doing nothing is not an option and doing nothing fails our families.”

Not surprisingly, the downgrade has turned into a political ‘blame game,’ with Gov. Corbett blaming the lack of pension reform and Democrats condemning Corbett’s leadership.

“Today, Moody’s Investors Service downgraded Pennsylvania’s credit rating citing Tom Corbett’s gimmick-filled budget, weak economy, and failed leadership,” Democratic nominee Tom Wolf said.

Corbett’s campaign responded in kind to Wolf’s comments.

“Moody’s has cited the Commonwealth’s growing pension liabilities as a primary reason for downgrading Pennsylvania’s credit rating despite millionaire Secretary Tom Wolf’s repeated denial of a pension crisis,” Chris Pack, communications director for the Corbett-Cawley Campaign said. “It is a true shame that despite all of the evidence of our state’s pension crisis that Secretary Tom Wolf continues to deny there is a problem at all. It is time for Secretary Tom Wolf to stop denying our state’s pension crisis for his selfish political reasons and instead encourage his Democratic cohorts to do what is right for the 12.7 million residents of Pennsylvania and not just what is best for the Harrisburg special interests.”

House Minority Leader Frank Dermody (D-Allegheny) countered, “He had four years to try to do things right, but all he did was put our state in a more precarious financial position. The governor’s near-total reliance on one-time, non-recurring revenue to ‘balance’ this year’s budget was transparently political, and Moody’s called him out on it.”

Republicans stood behind Corbett, claiming that pension reform is the reason why Moody’s decided to downgrade the commonwealth.

“In signing four balanced budgets, the governor has closed a $4 billion budget deficit while refusing to raise taxes on Pennsylvania families,” State Budget Secretary Charles Zogby said. “The bottom line is that structural deficiencies threaten the long-term stability and sustainability of our public pension systems, putting Pennsylvania taxpayers and the public school employees’ futures at risk. The time for pension reform is now.”

The downgrade from Aa2 to Aa3 may make it harder for the state to borrow money in the future, though Moody’s views Pennsylvania’s outlook as “stable.” What may be more important for our elected officials is who gets stuck with the blame for Pennsylvania’s financial issues heading into the election in November.

5 Responses

  1. Frank Dermody is right. And Moody’s did reference the “one-time, non-recurring revenue” and Tom Corbett did not address that concern. When a Democrat is right, we have to admit it.

  2. Corbett is tying pensions to property tax reform as a wedge issue. The overall strategy is FAIL AND BLAME. He fails and lays the blame on everyone else. We have a Governor that shorts education funding and when local school districts (usually Democrat) raise property taxes to make up the difference he points the finger at them. We point the finger at each other based on how many kids we have in school or what sort of retirement plan we might have. Brilliant. Fail and blame, divide and conquer.

    Instead of blaming each other why don’t we stick together, point the finger back at him, and remind the Guv the state could fully fund education if he taxed His friends that are fracking our gas. Or closed the Delaware loophole. Added a tax on cigars and smokeless tobacco. Stopped pretending multi-billion dollar corporations like UPMC are non profits and got them on the property tax rolls. He could have allowed modernization of our publicly owned Wine and Spirit Shops to increase state revenue instead of spending time trying to sell them off to corporate cronies. Or raised the minimum to force companies like WalMart to pay a living wage so their employees would actually be paying taxes rather than relying on public assistance. Why wouldn’t you accept the half billion medicare expansion plan offered by the feds? favorite would be to stop giving away BILLIONS IN CORPORATE WELFARE. We give more money away in tax breaks to FILTHY RICH INTERNATIONAL CORPORATIONS than we spend on the the public welfare safety net.

    Instead Corbett did nothing at all till now when he needs a soap box to stand on. But he wants us to believe the fault lies with any one but himself. Amazingly enough it seems a few people are falling for this shell game. Some one once said the buck stops here. Corbett says the buck stops somewhere else. Not the kind of leadership to bother to vote for this November.

  3. Republicans control Gov. State House and Senate last 4 years !!!

    Lets Blame Obama !!!lol

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