Pennsylvania’s recent debt downgrade means it may cost the state more to borrow money, because investors will want to pay less for taking on riskier debt.
The effect, however, of the lower score might be more political than financial.
Pennsylvania just went from being Aa1 to Aa2 as Moody’s Investor Service downgraded the commonwealth’s debt, citing the state’s growing pension costs as the major reason.
The downgrade is an indication the state’s pension problems are reaching a critical point, according to Jeff Roof, president of Roof Advisory Group for investment and financial planning in Harrisburg.
“A rating agency saw it appropriate to say, OK, Pennsylvania has some things it needs to address in the not-too-distant future,” he said Tuesday.
Gov. Tom Corbett has been saying for months his top issue this fall will be pension reform.
His office also points out that, although the state’s debt was downgraded, its outlook was elevated, from negative to stable.
Other Republican state lawmakers highlight the rating report’s mention of two consecutive on-time budgets as contributing to the commonwealth’s surer financial footing.