Pennsylvania successfully sold almost $1.16 billion in General Obligation refunding bonds that will be used to help refinance about $1.23 billion of outstanding bonds, State Secretary of the Budget Uri Monson announced June 5.
Pennsylvania Senate Republicans, however, said the refinancing in General Obligation refunding bonds doesn’t include a reasonable strategy to close the state’s multi-billion-dollar deficit, and they bemoaned “unrealistic spending” by the Shapiro administration.
“With two credit upgrades in two years and a clear commitment to responsible budgeting, the Shapiro administration is saving taxpayers money and strengthening the commonwealth’s financial future,” countered Monson. “This refinancing not only reduces our long-term debt burden — it also protects Pennsylvania from future risks and frees up resources to invest in education, infrastructure, and economic development.”
The refinancing follows the reaffirmation of Pennsylvania’s highest-in-a-decade credit ratings by Moody’s, Fitch, and S&P Global, which all have cited the commonwealth’s strong fiscal management, solid financial position, and steady economic growth under Gov. Josh Shapiro’s leadership, his office said.
Bond refinancing of prior-year debt will save state taxpayers millions in debt service over the remaining life of the bonds, according to Shapiro’s office, with this year’s issuance generating $71.5 million in gross debt service savings and $52.5 million in net present value (NPV) savings.
When combined with the refunding of bonds completed in December 2023 and October 2024, Pennsylvania taxpayers will benefit from $193 million in total savings over the next decade.
As part of the refinancing, the commonwealth successfully retired the remaining bonds from the First Series B of the 2010 Build America Bonds (BABs), originally issued under the American Recovery & Reinvestment Act to stimulate the economy during the financial crisis.
BABs included a 35-percent federal subsidy on interest payments to issuers — a subsidy that has been eroded by federal budget sequestration every year since 2013 and remains vulnerable to future cuts, according to Monson.
By refinancing the bonds with traditional tax-exempt debt, the state eliminates its exposure to further federal reductions and shields taxpayers from rising interest costs, he noted.
Pennsylvania took a multi-series approach to the sale, receiving eight total bids from four different bidding entities across the two series. The refunding achieved an NPV savings rate of 4.28 percent—exceeding the commonwealth’s target threshold of 3 percent, as outlined in its Debt Management Policy.
The refinancing also follows a 2024 credit rating upgrade to Aa2 from Aa3 by Moody’s, which cited “sound fiscal management,” “balanced budgets,” and “steady economic growth” as key reasons for the improved rating.
The Moody’s upgrade followed a similar upgrade to AA from AA- by Fitch in 2023, and a positive outlook from S&P Global, which affirmed its A+ long-term rating.
Meanwhile, in response to the administration’s announcement, a joint statement issued June 5 by Pennsylvania Senate President Pro Tempore Kim Ward (R-39), Senate Majority Leader Joe Pittman (R-41), and Senate Appropriations Committee Chairman Scott Martin (R-13) pointed out that while it’s good news that Pennsylvania taxpayers will save $71 million due to the refinancing of state bonds, the state’s strong financial position is due to Senate Republicans repeatedly fighting the spending impulses of both the former Wolf administration and the current Shapiro administration.
“In fact, the vast majority of the savings in our state’s fund balance and our Rainy Day Fund were built before Gov. Shapiro even took office,” the state lawmakers said.
“Gov. Shapiro’s budget proposal this year totals nearly $51.5 billion — an increase of $3.6 billion from the current year’s budget — and does not include a realistic path to close the state’s multi-billion-dollar structural deficit,” they added. “This unrealistic spending would ultimately lead to future tax increases for Pennsylvanians.”
Monsoon said that the Shapiro administration “will continue to be prudent stewards of the commonwealth’s resources.”