Nobody liked the state’s new budget: Moody’s on Monday cut Pennsylvania’s debt rating to Aa3 — citing its disapproval of gimmicks used to balance that budget, as well as the continuing long-term specter of pension obligations hanging over the state’s financial future.
Moody’s cited underperforming revenues and the continued use of one-time measures in its latest downgrade. After wrestling with lawmakers over public pensions and cutting millions of dollars through line-item vetoes, Pennsylvania Governor Tom Corbett didn’t sign the 2015 budget until more than a week after the start of the new fiscal year on July 1.
The state has about $50 billion of unfunded long-term pension liabilities. About 63 cents of every new dollar of state revenue goes to pay pension costs, Corbett, a Republican, has said.
Moody’s says it expects the state economy to grow slower than the U.S. economy overall, making the pension challenge tougher yet. The rating affects about $13 billion in state-issued debt.