Pennsylvania's interim budget reinforces the commonwealth's commitment to supporting full, timely payment of school district debt despite its budget impasse, Fitch Ratings said Jan. 11.
Fitch rates the commonwealth's pre-default school aid intercept and direct-pay enhancement programs A-plus with a stable outlook, one notch below its AA-minus rating, also stable, of the Keystone State's general obligation bonds.
Gov. Tom Wolf, a first-term Democrat, and the Republican-controlled legislature have quarreled the past year over a proposed $30 billion spending plan. On Dec. 29, Wolf approved three-fourths of the budget to free up funds for school districts and social service agencies while holding out for increased basic education aid through line-item vetoes.
The stopgap budget provided six months of basic education funding for school districts.
"More importantly, it provides for a full year of appropriation authority in other line items for school districts, including special education and transportation aid, and thereby establishes a clear path for the commonwealth to direct revenues to bond trustees as needed for the school credit enhancement programs," Fitch said in a commentary.
In August, Fitch commented that the budget impasse did not affect quality of Pennsylvania's school credit enhancement programs, and of the commonwealth and its appropriation-backed debt, because the commonwealth remained committed to ensuring timely debt service payment. Fitch maintained its ratings throughout the impasse.
The stalemate is in its seventh month. The Pennsylvania School Boards Association sued Wolf and the legislature in the Commonwealth Court of Pennsylvania on Jan. 8, calling the withholding of state and federal school aid illegal and unconstitutional.
The lawsuit also seeks damages for borrowing costs the loss of investment income. Local districts had to borrow roughly $1 billion to continue operating.
