Standard & Poor’s Financial Services downgraded Pennsylvania’s credit rating Wednesday in response to the state’s inability to pass a balanced budget.
“The downgrade largely reflects the commonwealth’s chronic structural imbalance dating back nearly 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.
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Earlier this summer, Gov. Tom Wolf signed a spending plan without enough revenue to pay for it. The state Senate passed a plan to raise taxes to fund the $2.3 billion gap, but House Republicans opposed the hikes and proposed a plan to use money from reserves and non-operational accounts as well as borrow against the state’s Tobacco Settlement fund.
Nathan Benefield, vice president and COO for the Commonwealth Foundation, said the credit downgrade is no surprise and the state must look at reducing expenses.
“This downgrade is the predicable outcome of Harrisburg’s refusal to live within its means,” Benefield said in a statement. “In announcing the downgrade, S&P points to Gov. Wolf’s allowing an unbalanced budget to become law – in two consecutive years – despite the state constitutional requirement that spending not exceed revenue.”
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Benefield said he hopes the downgrade – which will result in higher interest rates when the state borrows money – spurs lawmakers to action.
“This repeated failure to control spending has directly led to this downgrade,” he said. “It should serve as a jolt of reality to Gov. Wolf and lawmakers that actions have consequences, and their reckless overspending is hurting all Pennsylvanians.”
But Wolf said in a statement that tax hikes are necessary.
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“I have said repeatedly for three years that we must responsibly fund the budget with recurring revenues,” Wolf said. “The Senate understood the need for urgency and acted responsibly in July to fully fund the budget and enact recurring revenues to eliminate the deficit, and my administration has tried for weeks to hold off a downgrade. We must reach an immediate resolution to the budget and today’s news should be a wake-up call to come together and end this now.”
House Republicans issued their own statement after the downgrade announcement critical of S&P.
“Pennsylvanians are paying taxes and it is very disappointing Commonwealth budget costs will increase thanks to a small group of unknown people at Standard & Poor’s who make decisions based on interviews with a governor and press releases from the state’s fiscal officers,” the statement said.
