NEW YORK (Reuters) - S&P Global Ratings downgraded Pennsylvania’s general obligation debt one notch to A-plus on Wednesday as state officials struggle to close a $2.3 billion budget gap, the credit rating agency said.
Pennsylvania lawmakers are battling on how to balance its $32 billion spending plan nearly three months into the 2018 fiscal year, forcing Governor Tom Wolf to delay scheduled bill payments.
“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.
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 outlook is stable.
The commonwealth has relied too heavily on one-time revenue sources, limiting its available cash and leading to late or canceled payments, S&P said.
Over the past week, Pennsylvania missed about $1.7 billion in medical reimbursement payments and another $581 million in pension-related bills, S&P noted.
Wolf, who allowed the imbalanced budget to pass without a signature, vowed on Monday that legislatures would agree on a spending plan before Oct. 1.
“We view it as possible that lawmakers could fail to reach a compromise” by then, Spain said.
Reporting by Laila Kearney; Editing by Daniel Bases and Marguerita Choy