“The third shoe has dropped,” said Janney Capital Markets managing director Alan Schankel.

For Pennsylvania, bad news comes in threes.

Standard & Poor's handed the Keystone State its third general-obligation bond rating downgrade in three months and second in a week, lowering it to AA-minus from AA.

"The downgrade reflects our view of the state's diminished financial flexibility and growing expenditure pressures due to inaction on pension reform and limited revenue growth," S&P credit analyst John Sugden said Thursday.

Two days earlier, Fitch Ratings downgraded Pennsylvania, also to AA-minus from AA. In July, Moody's Investors Service dropped the state to Aa3 from Aa2.

"The third shoe has dropped," said Janney Capital Markets managing director Alan Schankel.

S&P also downgraded the commonwealth's appropriation-backed debt outstanding to A-plus from AA-minus. It lowered its rating on several tax increment bonds guaranteed by the commonwealth to A from A-plus and its rating on Pittsburgh & Allegheny Sports and Exhibition Authority's moral obligation debt outstanding to A-minus from A.

Its outlook is stable at the new rating.

The unfunded liability of Pennsylvania's two major pension plans -- the State Employees Retirement System and the Public School Employees Retirement System -- is estimated at $50 billion. Including other post-employment benefit, or OPEB, obligations, and municipal and county packages, the tab is around $73 billion.

"Unfortunately, Pennsylvania continues to underfund its major pension systems, a practice which has continued for over a decade," said Hummselstown, Pa., actuary and former Hershey Foods executive Richard Dreyfuss, an adjunct fellow at the Manhattan Institute for Policy Research.

Pennsylvania, the nation's sixth most populous state, is among several struggling with pension liabilities and other fiscal stresses.

"Mostly structural and not cyclical factors are eating away at the credit quality of states such as Illinois, New Jersey and Pennsylvania," Janney director Tom Kozlik said in a recent report.

Moody's Investors Service said earlier Thursday that despite strong recent returns, many U.S. state and local government pension plans are losing ground.

"These attributes worsen budgetary strain at many sponsoring governments, magnified by the aging demographics of government workers and pension beneficiaries," Moody's said.

Various proposals to overhaul the pension system in Pennsylvania have stalled in the legislature, including Gov. Tom Corbett's plan that would merge traditional defined-benefit plans with 401(k)-style plans for new employees. The state legislature, though, is not expected to pass such legislation during a truncated fall session.

According to Dreyfuss, benefit reductions to new hires will not offset the more than $6 billion in unplanned liabilities that evolved from the reduction in the assumed annual investment return rate from 8% to 7.5% that followed passage of the so-called Act 120 pension legislation in 2010.

"Pennsylvania continues to contribute 100% of a deficient rate, somehow believing this is a responsible financial practice. The more recent pension reform proposals have been limited to plan design changes for new hires, which will not affect this chronic underfunding or the ever-growing unfunded liability anytime soon," he said. "This is the fundamental and recurring message from the credit rating agencies."

Pennsylvania's economy, said Sugden, "continues to improve gradually, in our opinion, but not enough to alleviate some of the fiscal pressures the state is facing related to growing pension costs."

The development of Marcellus Shale natural gas and the growth in high-tech fields tied to some of the state's universities, notably in Pittsburgh, remain bright spots, said S&P. "However, these continue to be small and somewhat volatile sectors of the economy."

For fiscal 2015, said Sugden, the state finds itself at a crucial point. "In addition to underfunding its pensions, the state is relying on a substantial amount of one-time revenues to close the budgetary gap for fiscal 2015."

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