S&P cuts Pennsylvania GO debt rating to 'AA-minus'

Reuters News
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Posted: Sep 25, 2014 7:11 PM

(Reuters) - Standard & Poor's Ratings Services on Thursday cut its rating on Pennsylvania's GO debt outstanding to 'AA-minus' from 'AA', citing weakened financial position and increased expenditure pressures. S&P's outlook is stable.

"The downgrade reflects our view of the state's diminished financial flexibility and growing expenditure pressures due to inaction on pension reform and limited revenue growth," S&P said.

S&P said the 2014 outlook is for higher employment growth of 0.9 percent but still below the 1.6 percent projected rate of national employment growth.

"The stable outlook on Pennsylvania reflects our view that the state will continue to manage its finances with limited financial flexibility," S&P said in its note.

S&P also lowered its rating on several tax increment bonds guaranteed by the commonwealth to 'A' from 'A-plus'.

On Sept. 23, Fitch Ratings cut Pennsylvania's rating to "AA-minus" because of the state's budget problems and escalating pension liabilities.

Nearly 7 percent, or $2 billion, of Pennsylvania's $29 billion budget for fiscal 2015 relies on one-time revenue sources, Fitch analysts had said.

In July, Moody's Investors Service cut Pennsylvania debt to "Aa3" from "Aa2", the third consecutive year that a new state budget has prompted a credit cut. Moody's outlook is stable.

(Reporting By Krishna Chaithanya; Editing by David Gregorio)