Another domino from the Pennsylvania budget impasse has toppled.
Standard & Poor's late Friday withdrew its ratings based on the commonwealth's state aid intercept program for school districts and community colleges.
"In the absence of an adopted budget, there are no state funds flowing to Pennsylvania school districts and community colleges and, therefore, no funds to intercept," S&P said in a statement. "The duration of the budget impasse and the lack of alternative measures to ensure its proper functioning, in our view, indicate a lack of commitment to the state aid intercept program."
The ratings had been A or A-plus depending on bond provisions, according to the S&P statement.
The intercept program enforces the payment of school districts' bond debt service by withholding basic education funding or state aid payments from a school district that fails to make a debt service payment and remit the funds directly to the paying agent bank for the benefit of bondholders.
S&P had placed the ratings on credit watch with negative implications in September. Moody's Investors Service last month downgraded the intercept programs to A3 from A2.
Pennsylvania is in the sixth month of a stalemate between Democratic Gov. Tom Wolf and the Republican-controlled legislature. The fiscal year began July 1.
House of Representatives members met on Sunday night to consider reconciling their proposed $30.3 billion spending plan for fiscal 2016 with the $30.8 billion version that Wolf and the Senate prefer.
New education spending and how to disperse it are central to the talks. The Senate and House versions call for $350 million and $150 million, respectively. The Senate has passed companion bills that would move new state and school employees into a hybrid defined benefit-defined contribution plan and tweak the state-controlled liquor-store system.
The Senate pension bill would not change Wolf's plan to borrow through the issuance of $3 billion in pension obligation bonds.
All three major bond rating agencies downgraded Pennsylvania's general obligation bonds last year, citing chronic budget imbalance and the state's unfunded pension liability, estimated at up to $57 billion. Moody's rates Pennsylvania Aa3 with a negative outlook. Fitch Ratings and Standard & Poor's rate them AA-minus, with stable outlooks.
Pennsylvania has been late with its budget nine of the last 13 years. In 2003, many school districts said they could not afford to open after the December holiday break, prompting then-Gov. Ed Rendell and lawmakers to pass a budget.
