As if bond rating downgrades, a $50 billion unfunded pension liability and teetering school districts weren’t enough, Pennsylvania must wrestle with more political scandal.
State Treasurer Rob McCord resigned late Friday amid looming federal corruption charges. McCord, treasurer for six years and an unsuccessful Democratic candidate for governor last year, said he would plead guilty to federal charges of intimidating potential campaign contributors during his gubernatorial run.
McCord is not the only elected official under a white-hot glare. Attorney General Kathleen Kane, who took office in 2013, is facing possible charges of leaking grand jury information. A statewide grand jury, based in Norristown, has submitted its findings to Montgomery County District Attorney Risa Vetri Ferman.
“The recent resignations, alleged scandals and attorney general investigations can affect an investor’s view of the Keystone State if their choices are [between] Pennsylvania and a thriving neighboring state, although some of the surrounding states have their issues as well,” said David Fiorenza, a professor at Villanova School of Business and former chief financial officer of Radnor Township, Pa.
Neighboring New Jersey is home to basket-case Atlantic City, where Gov. Chris Christie named Kevyn Orr, the emergency manager who put Detroit into bankruptcy, as a consultant to Atlantic City's emergency manager. Christie, meanwhile, is battling a lawsuit over lack of payments to the state's pension system.
In a video that his attorneys, Robert Welsh and Catherine Recker, released, McCord said he “stepped over the line by reminding them that I could make things difficult for them.” He added: “I essentially said the potential contributors should not risk making an enemy of the state treasurer. Clearly, that was wrong. I was wrong. It was a mistake. I stand ready to pay the price for that mistake.”
Gov. Tom Wolf, who defeated McCord in the Democratic primary, praised him for saving the commonwealth more than $1 billion by modernizing the Treasury Department. Christopher Craig, chief counsel for the treasurer’s office, will run the office until Wolf nominates a permanent successor.
The state treasurer’s office is no stranger to scandal. Treasurer Budd Dwyer fatally shot himself in the mouth in January 1987 at a press conference in Harrisburg before his scheduled sentencing on a federal bribery charge.
Wolf, meanwhile, is pressing ahead with efforts to reverse some of the policies of predecessor Tom Corbett, a Republican he defeated in November. Last week, he issued a moratorium on licensing for natural gas in state parks.
“He is not impressed by the [Marcellus Shale] fees generated, but fulfilling his campaign promises.” said Fiorenza. “He will find the revenues through increased income taxes in a tiered income level approach.”
In addition, said Fiorenza: “With lower gas prices, there has been some talk around the capitol of increasing the excise tax for transportation and infrastructure improvements, on top of the current nine-cent increase this year.”
Pennsylvania last year received downgrades from the three major bond ratings, all of which cited the unfunded pension liability of the commonwealth’s two major pension plans, the State Employees Retirement System and the Public School Employees Retirement System.
Fitch Ratings and Standard & Poor’s now rate Pennsylvania's general obligation bonds AA-minus. Moody’s Investors Service rates them Aa3.