Friday, 24 November, 2017

Wolf Sees Downgrade Without Budget Deal Soon

Pa. Senate to Take Up House Revenue Proposal For Budget Wolf Sees Downgrade Without Budget Deal Soon
Jerome Frank | 22 September, 2017, 00:50

"The decision by Standard & Poor's to downgrade Pennsylvania's credit rating should come as no surprise".

The credit rating agency Standard and Poor's lowered its rating on Wednesday to an "A+'". With this downgrade, Pennsylvania has slid to the bottom five states rated by S&P.

Democratic Gov. Tom Wolf on Tuesday said he was optimistic the Republican-controlled Legislature can produce a deal to patch a projected $2.2 billion budget gap in the coming days and end a almost three-month stalemate.

Senate Republicans, Democratic lawmakers and public finance professionals say such a transaction is nothing more than borrowing and would likely carry a higher effective interest rate even than a traditional securitization agreement because it shifts some risk to the lender.

"The downgrade largely reflects the commonwealth's chronic structural imbalance dating back almost a decade, a history of late budget adoption and our opinion that this pattern could continue", S&P analyst Carol Spain said in a statement.

The downgrade means Pennsylvania will pay more to borrow money: an estimated $10.0 million for every billion dollars the state borrows or refinances. No matter what the right-wing advocates say, a majority of Republican members of the General Assembly is simply unwilling to reduce state spending to the level necessary to balance the budget without new taxes - indeed they have taken credit for increased spending for education and human services.

In a two-page letter sent September 12 to lawmakers and Wolf, state Treasurer Joseph M. Torsella and Auditor General Eugene A. DePasquale, both Democrats, cited the state's imminent inability to pay its bills.

While the Pennsylvania government has bailed the state out every year since the recession, two independently elected officials, Treasurer Joe Torsella and Auditor General Eugene DePasquale (both Democrats), have refused to authorize a short-term loan during the stalemate.

They said the Treasury should let the state keep spending despite the funding gap, because "revenue is still coming in".

In the past week, Wolf delayed making more than $1.7 billion in payments, mostly to Medicaid insurers and school districts.

The downgrade is the second by Standard and Poor's in three years - the previous one was under Wolf's Republican predecessor - as budget-makers have struggled to pull Pennsylvania out of a long-running deficit. "I have said repeatedly for three years that we must responsibly fund the budget with recurring revenues", he said.

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