Pennsylvania’s transportation funding bill is positive for the commonwealth and the Pennsylvania Turnpike Commission and could pave the way for similar legislation to cope with unfunded pension liability, Fitch Ratings said in a report.
“This legislation represents a notable commitment to address a challenge faced by many states. ... The success of Act 89 could bode well for another key funding challenge, dealing with a growing and unfunded pension liability,” Eric Kim, a director in Fitch’s states group, said in a Dec. 9 statement.
Gov. Tom Corbett last month signed the transportation bill, under which the state will invest about $7.4 billion over five years and generate roughly $2.4 billion in additional annual revenue once implementation is completed in fiscal 2018.
The bill passed only after contentious political debate.
Kim said passage “provides a significant boost to transportation funding for the commonwealth, and increases long-term financial flexibility for the Pennsylvania Turnpike Commission.”
The bill calls for the commission’s annual required $450 payment to the state Department of Transportation for
Since 2008, PTC has made over $3.9 billion in payments to the Pennsylvania Department of Transportation to expire in fiscal 2022, as opposed to fiscal 2057 before to the legislation.
“As these obligations were to be funded with PTC debt, this change will result in a significantly lower future leveraging of the subordinate lien for PTC over the next few decades,” Fitch said.
Corbett has proposed overhauling the pension system for state employees, but it has stalled in the legislature. Pennsylvania has an unfunded pension liability of roughly $45 billion.