Wolf Sees Downgrade Without Budget Deal Soon

Toni Houston
September 22, 2017

"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. It is the first known time that Pennsylvania state government has missed a payment as a result of not having enough cash.

The Senate on Wednesday voted 43-7 to non-concur on the revenue plan crafted by House Republicans and to create a conference committee to write a new plan.

In addition, House Republicans want to move about $400 million in so-called lapsed funds, or funds not spent in prior budgets, from various agencies.

Their latest inane solution (after putting slot machines in bars, clubs, airports, rest homes, etc.), is putting them in every household (internet gambling).

Other smaller transfers also are part of the budget plan, including $20 million from legislative reserve accounts and $50 million from the Pennsylvania Liquor Control Board.

The Senate will take up a house proposal that was passed lat week, which would take money from PennDOT and the E.P.A's coffers that are not being used.

The Senate, backed by Wolf, passed a roughly $550 million tax package that hit Marcellus Shale natural gas production; electric, natural gas and telephone utility customers; and sales through online marketplaces like Amazon and eBay. But the House has opposed the tax increases.

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.

"For months, I have warned that a credit downgrade was looming. I have said repeatedly for three years that we must responsibly fund the budget with recurring revenues", he said. "We would be using a significant amount of one-time funds to balance a 2.2 billion dollar hole".

The downgrade, which puts Pennsylvania debt four notches below S&P's AAA gold standard rating also reflects the state's weakening liquidity position, S&P said.

The House GOP said the focus needs to be on tackling entitlement programs and corrections costs. But, in July, House Republican leaders pulled out of negotiations over a revenue bill, and serious talks have yet to restart.

If the General Assembly had enacted the modest personal income tax increase Governor Wolf proposed in February 2017, not only would the budget be balanced this year, but there would be nearly no carryover deficit from last year.

"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".

Wolf has said he expects there will be a compromise before the end of the month.

Other reports by Ligue1talk

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