Pennsylvania faces a downgrade in the next few weeks if it doesn’t balance its budget with an appropriate revenue package, S&P Global Ratings said Wednesday.
Gov. Tom Wolf said two days earlier he would let the $32.2 billion spending plan for fiscal 2018 become law without his signature.
Wolf and lawmakers, however, must still fund it and the plan is out of balance, according to S&P, by about $2.2 billion or 6.8% of expenditures.
Last week, S&P put Pennsylvania on credit watch with negative implications. S&P and Fitch Ratings assign AA-minus ratings to Pennsylvania’s general obligation bonds, while Moody’s Investors Service rates them Aa3.
“We understand that based on the commonwealth's current cash position and cash flows, through July, it will be able to address any expenditures in excess of revenues through internal borrowing from the Pennsylvania state treasury,” S&P said in a statement.
“However, we expect that in the absence of balancing revenue package or alternative measures to address the misalignment, the commonwealth would likely need to increase its cash flow borrowing above previous levels.”
S&P’s watch status also applies to its A-plus appropriation, A departmental appropriation, and A-minus moral obligation ratings on Pennsylvania.
“Absent action in the coming weeks to address the structural imbalance, we would likely lower these ratings,” S&P said.