Pennsylvania’s General Obligation Rating Cut by Moody’s

Editor’s Note: Gee, the concern is pensions? How many times have we all been told that the PA’s pension systems were bulletproof? This is only the beginning of the pension/defined-benefit fiasco. Not a single state is immune. If you are vested in one of these systems you seriously need to consider the likelihood that your pension is going to be a lot less than you initially were led to believe and learn to live accordingly NOW.

Pennsylvania had its general- obligation debt rating cut a step to Aa2 by Moody’s Investors Service, which said rising pension liabilities will weigh on the state’s economic recovery.

The grade, Moody’s third-highest rating, also reflects moderate economic growth and the state’s relatively high debt level, according to a statement today from the New York-based company. Moody’s changed its outlook for the credit to stable from negative.

“Large and growing pension liabilities and moderate economic growth will challenge the return to structural balance, contributing to a protracted financial recovery,” Moody’s said in the statement. The state’s financial position deteriorated in fiscal 2012, according to the company, which said Pennsylvania probably will borrow to cover its cash-flow needs in 2013.

Republicans who lead the Legislature in Pennsylvania, considered a swing state in this year’s presidential election, passed a $27.7 billion budget for 2013, which began July 1. The spending plan signed by Governor Tom Corbett, also a Republican, cut business taxes and eliminated a general-assistance program for the poor and disabled.

Eric Shirk, a Corbett spokesman, didn’t immediately respond to a telephone call seeking comment on the downgrade.

Read more at Andy Sutton’s Extemporania