Structural Deficit Triggers State Bond Rating Downgrade

Member Group : Commonwealth Foundation

John Bouder, 717-671-1901

PA’s ‘Growing Structural Imbalance’ Cited in New Credit Downgrade
One-Time Revenue Sources and Unfunded Pension Liabilities the Cause

Today, credit rating agency Moody’s downgraded Pennsylvania’s general obligation
bond rating from Aa2 to Aa3, citing the state’s use of one-time budgetary stop-gap measures and the continued underfunding of public pensions. This marks the third credit downgrade from ratings agencies in as many years.

"This downgrade isn’t surprising—it’s what we’ve been warning about for years," said Nathan Benefield, vice president of policy analysis for the Commonwealth Foundation.

"While Pennsylvania has managed to balance its budget without new taxes, we’ve yet to close the structural deficit, continue to spend more than revenue for the seventh consecutive year, and haven’t addressed the growing pension crisis.

"Moody’s has issued a clear warning that until we address the long-term cost-drivers in the budget, ratings agencies—and more importantly, investors and businesses, will look at Pennsylvania warily."

Nathan Benefield is available for comment on the latest credit rating downgrade and its causes. Please use the contact information below to schedule an interview.

John Bouder
Communications Officer
Commonwealth Foundation
Phone: 717-671-1901
[email protected]