The New York-based credit ratings agency Moody’s Investors Service has slapped a lower rating on Pennsylvania’s debt as state budgetmakers face spiraling public pension costs.
Monday’s downgrade means Pennsylvania is now closer to the bottom of Moody’s ratings for the 47 states with general obligation debt.
Thirty states still have ratings of Aaa or Aa1, while Pennsylvania joins 16 other states with an Aa2 rating or below. Moody’s had boosted Pennsylvania’s rating to Aa1 in 2010.
Moody’s says it acted because Pennsylvania’s relatively slow economic growth isn’t likely to keep up with its rapidly growing public employee pension contributions.
It also noted that Pennsylvania’s unfunded pension liabilities are growing, and said the state lost flexibility by using cash reserves to balance the just-approved spending plan for 2012-13.