With cash running low, Wolf has delayed $1.7 billion in payments while state lawmakers quarrel for a third month over patching a projected $2 billion-plus deficit in a $32 billion budget bill they passed June 30.
"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", said S&P Global Ratings credit analyst Carol Spain.
"The decision by Standard & Poor's to downgrade Pennsylvania's credit rating should come as no surprise". The outlook is stable.
The budget bill also seeks a $1 billion lump-sum payment by selling rights to a portion of the state's tobacco settlement fund, which now receives about $350 million per year. While Governor Wolf produces a budget plan that does actually reduce spending, they produce lists of fantastical proposals and claims of "waste, fraud, and abuse" that no one in their own caucuses even take seriously and that are never enacted despite overwhelming majorities in both houses of the General Assembly. "I have said repeatedly for three years that we must responsibly fund the budget with recurring revenues".
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They said the Treasury should let the state keep spending despite the funding gap, because "revenue is still coming in". "We would be using a significant amount of one-time funds to balance a 2.2 billion dollar hole". Their letter said further borrowing "creates an economic "moral hazard" that effectively increases the long-term risks to the commonwealth's finances" and that they were therefore "disinclined to support additional lending" to the state's General Fund. Governor Wolf and the Senate are at odds with the House on how to fully fund the budget that became law back in July, and reaction to the downgrade broke along those lines.
Democratic lawmakers accused anti-tax House Republicans of forcing the downgrade, while House Republican leaders blamed Standard and Poor's as well as state "fiscal officers" who "refuse to pay bills".
"Unfortunately for the citizens of the state, the sword has fallen today and we will all pay the price for the fundamentally irresponsible and dishonest approach to state budgeting taken by Speaker Turzai and his followers".