Gov. Tom Wolf said late Monday he will allow Pennsylvania’s $32 billion budget become law without his signature.

State lawmakers must still come to terms among themselves and with the governor how to fund it. Democrat Wolf and the Republican-controlled legislature are still negotiating a funding package that could revolve around tobacco-settlement borrowing and gambling expansion.

“In the coming days, it is my hope that the General Assembly will come together to pass a responsible solution to balance our books,” Wolf said in a statement. “There are many options available to balance the budget in the long-term like those I presented earlier this year. Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania’s fiscal future.”

Gov. Tom Wolf will let Pennsylvania's $32 billion budget take effect without his signature. Pennsylvania Internet News Service

Pennsylvania’s knack for late and imbalanced budgets over the past decade has drawn the attention of bond rating agencies. On Thursday, S&P Global Ratings placed its AA-minus general obligation rating on the commonwealth on credit watch with negative implications.

“Just last week, we received a warning that if we did not do the hard work to balance our budget, Pennsylvania's credit would be downgraded,” said Wolf. “This independent call to action made it clear we must avoid gimmicks to protect from a downgrade, as we have been able to do since I took office.”

“As I always say, nothing’s dead forever and nothing’s alive forever,” Sen. Majority Leader Jake Corman, R-Bellefonte, told reporters late Sunday. “There’s nothing new, but we’re working on it. Progress is being made.”

Pennsylvania’s knack for late and imbalanced budgets over the past decade has drawn the attention of bond rating agencies. On Thursday, S&P Global Ratings placed its AA-minus general obligation rating on the commonwealth on credit watch with negative implications.

“S&P is making a wise decision as the Pennsylvania legislature had been doing their political delay tactics for the past few years instead of making decisions that are for the best interests of the citizens and businesses of the state,” said David Fiorenza, a Villanova School of Business professor and a former chief financial officer of Radnor Township, Pa.

Fitch Ratings also assigns an AA-minus rating to Pennsylvania GOs, while Moody’s Investors Service rates them Aa3.

“I think the rating agencies are getting serious," said Janney Capital Markets managing director Alan Schankel, noting that Moody's was on the verge of downgrading Illinois to junk before that state ended a two-year budget impasse.

“Pennsylvania’s legislature would do well to complete the process or they’ll pay the price,” said Schankel.

Richard Dreyfuss, an adjunct fellow with the Manhattan Institute for Policy Research, said S&P’s red flags regarding “a pattern of financial mismanagement” are “consistent with the paramount goal of many policymakers of staying in office.”

He added: “It is equally noteworthy that even with the prospects of a ‘balanced budget’ that pension underfunding continues unabated.”

Wolf last month signed a pension overhaul bill that enables future state hires to choose between a traditional benefit plan and a hybrid that includes a 401(k)-style defined-contribution component.

Opponents, including Dreyfuss, say the bill does nothing to curb spiraling pension debt, with some estimates pegging the unfunded liability at $76 billion.

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