Moody’s Ratings on Monday upgraded Pennsylvania’s credit rating, citing the state’s sound fiscal management, balanced budgets, and steady economic growth, and revised its outlook from positive to stable.
“The upgrade to Aa2 [from Aa3] is based on Pennsylvania’s significant increases in its budget stabilization reserves and moderated pressure from long-term liabilities that reduce historic credit weaknesses and will provide important flexibility in the event of future budget stress,” said Moody’s.
“Pennsylvania’s stable outlook is based on its solid budget reserves, slow-but-steady economic growth, and sound fiscal management that will support a relatively stable financial position amid growth spending pressures,” the firm said.
Gov. Josh Shapiro earlier today said the upgrade by Moody’s follows a similar upgrade from Fitch Ratings in November 2023 that raised the state’s credit rating to ‘AA’ from ‘AA-,’ as well as a rating outlook upgrade from S&P Global Ratings in September 2023 that improved the commonwealth’s outlook to ‘positive’ from ‘stable’ while affirming its A+ long-term rating.
“Under my administration, Pennsylvania has received two ratings upgrades in our first two years — a testament to our responsible fiscal stewardship that sets the commonwealth up for success in the future while making critical investments in our economy and our workforce today,” said Shapiro in a statement released earlier today.
“Pennsylvania has the only divided legislature in the country, but we’ve shown two years in a row that we can come together to pass balanced budgets that invest in Pennsylvanians, grow our economy, and create real opportunity for people all across the Commonwealth,” the governor added.
The rating upgrade is in anticipation of Pennsylvania’s plans to sell $1.4 billion issuance of new money, and $238 million refunding, planned for mid-October. The state is now at its highest rating since 2013, Shapiro said.
Specifically, Moody’s upgraded to Aa2 from Aa3 the state’s issuer rating and assigned a Aa2 rating to its approximately $1.4 billion General Obligation Bonds, First Series of 2024, and $238 million General Obligation Bonds, First Refunding Series of 2024.
“We have also upgraded the ratings on approximately $10.8 billion of outstanding general obligation bonds to Aa2 from Aa3; the ratings on outstanding appropriation backed debt and lease ratings to Aa3 from A1 and to A1 from A2; the Pennsylvania School District Intercept Program rating to Aa3 from A1, and the Pennsylvania General Municipal Pension System State Aid Program rating to A1 from A2,” according to the firm.
Moody’s also upgraded to Aa3 the rating on Pennsylvania Turnpike Commission’s $983 million of outstanding Motor License Fund-enhanced Turnpike Subordinate Special Revenue Bonds, the firm said, adding that the outlook has been revised to ‘stable’ from ‘positive.’
Pennsylvania Senate Appropriations Committee Chairman Scott Martin (R-Lancaster) applauded the Moody’s announcement, calling the bond rating upgrade good news.
However, he also said that Moody’s revision of the state’s financial outlook from ‘positive’ to ‘stable’ is a reminder that lawmakers and the governor still have work to do to achieve a sustainable, structurally balanced budget in the future.
Specifically, Moody’s noted that a sustained return to structurally balanced budgets and maintenance of sound budget reserves could lead to future credit upgrades, while sustained budgetary imbalance and depletion of reserves could lead to future downgrades.
The Moody’s upgrade, said Martin, “is another positive step as we continue to work toward achieving responsible, structurally balanced budgets in the years ahead.
“At the same time,” he said, “it serves as a critical reminder of the importance of maintaining the state’s Rainy Day Fund and avoiding the temptation to overspend and create bigger deficits in the future. We have worked very hard to achieve these credit rating upgrades that save taxpayers huge amounts of money, and we owe it to taxpayers to continue to manage their money wisely.”
Under the Shapiro administration, the state’s fiscal progress has been supported by a growing economy and the bipartisan 2024-25 budget that the governor signed into law in July. The commonwealth also conducted a successful bond sale in December 2023 that saved taxpayers millions of dollars, including $99.7 million in gross debt service savings and $80.7 million of net present value debt service savings.
“Pennsylvania is clearly on a strong path toward continued economic and financial success,” said State Secretary of the Budget Uri Monson. “Our responsible investments and sound management are keeping the commonwealth on solid fiscal footing while providing critical support to Pennsylvanians.”