Pennsylvania budget stalls again as top lawmaker slams S&P
PHILADELPHIA -- Hours after S&P Global Ratings downgraded Pennsylvania over its budget impasse, its state Senate prolonged the deadlock.
The Senate, by a 43-7 vote in Harrisburg on Wednesday, rejected the House of Representatives' $2.2 billion revenue package to balance a $32 billion fiscal 2018 budget that Democratic Gov. Tom Wolf let become law without his signature.
The House had rejected the Senate's own package, reflecting a split statewide among Republicans, who control both branches.
S&P's downgrade earlier in the day lowered its general obligation rating on the commonwealth to A-plus from AA-minus, triggering an angry response from House Majority Leader Dave Reed, R-White Township.
“Pennsylvanians are paying taxes and it is very disappointing commonwealth budget costs will increase thanks to a small group of unknown people at Standard & Poor’s who make decisions based on interviews with a governor and press releases from the state’s fiscal officers," Reed said in a statement,
“This rating agency for years cited the public pension system as a top reason for concern, and this year a bipartisan pension reform plan passed the legislature and is now law – a plan that is fully actuarially sound and will save the commonwealth billions over the next 30 years," said Reed.
S&P on July 6 placed the commonwealth’s GOs on credit watch with negative implications. Wednesday’s action marks the sixth downgrade or negative credit watch by S&P alone since 2012.
“The downgrade largely reflects the commonwealth’s chronic structural imbalance dating back nearly a decade, a history of late budget adoption and our opinion that this pattern could continue,” said analyst Carol Spain.
S&P, which assigned a stable outlook, also lowered its rating on Pennsylvania's appropriation debt to A from A-plus. Additionally, it lowered its departmental appropriation rating to A-minus from A and its departmental and moral obligation rating to BBB-plus from A-minus.
Moody’s Investors Service and Fitch Ratings rate Pennsylvania GOs Aa3 and AA-minus, respectively.
Pennsylvania joins Illinois, New Jersey and Connecticut as states with at least one rating below the AA category.
Wolf objected to the no-tax-hike House revenue plan, saying it merely transfers $600 million from off-budget accounts, provides no recurring revenues and ignores Pennsylvania's long-term deficit.
The Senate bill included new taxes on natural gas production and energy consumption, combined with roughly $1.25 billion of certificates of participation secured by tobacco-settlement payments.
Marc Stier, director of the liberal-leaning Pennsylvania Budget and Policy Center, blamed House Speaker and possible gubernatorial candidate Mike Turzai, R-Marshall Township, for what he called dishonest budgeting.
"Perhaps the clanging of the sword will awaken the many responsible Republican legislators in both the House and Senate and lead them to demand serious action to resolve the budget crisis quickly and reasonably," Stier wrote in a commentary.
"If they do so with dispatch, we can avoid further credit downgrades, and perhaps even see the state’s credit rating repaired before too long."