Pennsylvania lawmakers pass budget but not pension reform

Reuters News
Posted: Jun 30, 2013 9:43 PM
Pennsylvania lawmakers pass budget but not pension reform

By Michael Sadowski

Harrisburg, Pennsylvania- (Reuters) - Pennsylvania Governor Tom Corbett signed a nearly $28.4 billion budget for fiscal 2014, which starts on Monday, but lawmakers declined to take action Sunday on a controversial public pension bill until fall.

The inaction on Corbett's plan to reduce the state's $47 billion-and-growing public pension shortfall is expected to lead to credit rating downgrades and higher borrowing costs.

A report by Moody's Investors Service last week ranked Pennsylvania the eighth-worst among all U.S. states as measured by pension liabilities to revenues, while the so-called yield spread over triple-A-rated bonds paid on Pennsylvania bonds rose about a third since January.

Moody's rates Pennsylvania at Aa2 with a stable outlook. Fitch Ratings said in April that it would decide whether to cut its AA-plus rating on Pennsylvania after reviewing the budget enacted for fiscal 2014.

The legislature also did not pass Corbett's proposals to privatize state-run liquor stores and hike taxes and fees to fund a $2 billion transportation package, two items that lawmakers are also expected to reconsider in the fall.

For Corbett, a Republican up for re-election in 2014 who has trailed potential Democratic challengers in recent polls, the apparent failure of his three-pronged agenda in a legislature led by his own party is a test of his leadership.

"We made progress on all these things. Things are grinding ahead, just couldn't pull them all together," House Speaker Sam Smith told the Pennsylvania Independent.

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The 111-92 budget vote in the Pennsylvania House ended three hours before the beginning of the new fiscal year.

House Majority Leader Mike Turzai called it a "compassionate budget" that was responsible to both taxpayers and those who receive state funding.

The budget for fiscal 2014 is a 2.3 percent, or $645 million, increase over the current year's spending plan. It was also $64 million less than Corbett proposed in February.

(Reporting by Michael Sadowski in Harrisburg and Hilary Russ in New York; Editing by Stacey Joyce)