Auditor General Warns Budget Stalemate Could Further Downgrade PA Credit

Apr 29, 2016

The state’s top fiscal watchdog says another budget impasse would lead to a “backdoor tax increase” in Pennsylvania.

Auditor General Eugene DePasquale said Thursday that if lawmakers and the governor allow another lengthy budget stalemate to take place without “dealing” with the state’s projected structural deficit, the commonwealth will receive another credit downgrade, hiking the cost of borrowing.

“Every road project, every school construction project, every time a school district or the state want to take out a loan... that money will not go as far,” said DePasquale at a press conference in the Capitol.

Pennsylvania has received multiple credit downgrades over the past few years. Rating agencies have cited the state’s growing pension debt, the use of one-time money sources to balance its budget, and, more recently, partisan gridlock.

DePasquale said the auditor general’s office plans to monitor the cost of any 2016-17 budget impasse for schools as well as county human services that rely on state funding.

The nearly nine-month stalemate that stretched into 2016 drove school districts to borrow a total of just under $1 billion, at an estimated cost of as much as $50 million in interest payments, DePasquale said.