“Investors will not soon forget the Pennsylvania 2015-16 budget impasse roller coaster ride,” said Tom Kozlik, municipal strategist at PNC Capital Markets.

Pennsylvania finally has a state budget but remains vulnerable to more rating downgrades, said a Philadelphia-based municipal strategist.

Gov. Tom Wolf, a Democratic governor at odds with the Republican-controlled legislature since taking office in January 2015, said Wednesday he would not veto the $30 billion spending plan, which was nine months or 266 days late.

Now only Illinois lacks an enacted budget for fiscal 2016.

"There is nothing that has occurred in recent weeks or months that leads us to believe the spending plan will begin to put Pennsylvania back on a path to structural balance," said Tom Kozlik, managing director at PNC Capital Markets LLC in Philadelphia. "Investors will not soon forget the Pennsylvania 2015-16 budget impasse roller coaster ride."

Wolf approved 80% of the budget in December.

Releasing the remaining $6.6 billion frees up funding for school districts -- which have had to borrow nearly $1 billion for contingencies as of January, according to state Auditor General Eugene DePasquale -- and social service organizations.

Bond rating agencies have pummeled the commonwealth with five downgrades in the last three years, citing structural deficits and an unfunded pension liability estimated at up to $63 billion. Wolf said Pennsylvania faces a $2 billion deficit for 2017.

"Without broader policy changes, Pennsylvania's structural deficit will worsen," Kozlik said.

Standard & Poor's Thursday removed Pennsylvania from CreditWatch with negative implications following adoption of the budget, affirmed its AA-minus general obligation rating, and assigned a negative rating outlook.

The negative outlook "reflects our view that the state's fiscal issues lie in lack of political will to solve them in a timely manner," wrote S&P analyst Carol Spain.

Fitch Ratings also assigns Pennsylvania GOs its AA-minus rating while Moody's Investors Service rates them Aa3.

Rating downgrades by at least one notch could happen soon, said Kozlik. S&P three weeks ago fired a warning shot, saying it would downgrade Pennsylvania by at least once notch if a budget does not close the 2017 gap "in a timely manner."

DePasquale said many school districts were preparing to close by the end of April. The schools weren't going to borrow anymore and the banks were going to stop lending.

His office has estimated that the budget impasse has led school districts to borrow $1 billion to make up for missing state funds.

"When I say $1 billion, I'm not talking about investing to build a new building or to hire new teachers," he said at a Widener University Commonwealth School of Law conference in Harrisburg. "I'm talking about simply to pay the light bill, or to pay the current salaries of teachers that still exist. One billion dollars -- tens of millions of interest costs for that borrowing."

Kozlik said investors had asked how Pennsylvania schools were operating, in many cases with little of their typical revenue streams. Many districts, said Kozlik, pared expenses and delayed purchases before doing emergency borrowing.

The resilience of Pennsylvania's school districts will enhance their credibility, he said. "An increased amount of credibility is important because this uncertainty is likely to continue."

Wolf said he would veto the so-called fiscal code -- a separate budget document loosely described as an owners' manual for certain budget expenses -- because it contains "unconstitutional provisions," guts important environmental regulations, and tries to establish legislative authority over matters that fall under executive jurisdiction.

Past fiscal codes have included funding for lawmakers' pet projects and even riders, or attachments, for unrelated legislation, notably the 2011 ban on state capital Harrisburg filing for bankruptcy.

"The Wolf administration will work to distribute the funding provided in the general appropriations bill in the most appropriate manner possible," the governor added.

Former Michigan Treasurer Andy Dillon groups Pennsylvania with several states whose economy is problematic.

"Illinois, Pennsylvania, New Jersey, Connecticut and maybe New York and California … these states are in big trouble," said Dillon, now an executive director with turnaround firm Conway MacKenzie Inc.

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