S&P revises Pennsylvania’s outlook to positive from stable, affirms GO rating

S&P Global Ratings said Friday it revised Pennsylvania’s credit outlook to positive from stable. At the same time, S&P affirmed its A-plus long-term rating on the state’s $10.7 billion of outstanding general obligation bonds.

S&P said the outlook reflects “our view that Pennsylvania has continued to make progress toward structural budgetary balance, with positive operating results in five of the past six years, leading to stronger reserves that are better aligned with state policies.”

The positive view, S&P added, “also reflects our expectation that forecast outyear structural imbalances would be addressed with emphasis on sustainable solutions commensurate with the current rating level. In addition, we expect Pennsylvania’s liquidity position will remain stable in the near term.”

S&P also affirmed the A rating on the state’s appropriation debt, A-minus rating on appropriation bonds issued for the North Versailles Township Industrial Development Authority and the Butler Redevelopment Authority, and BBB-plus rating on the state’s moral obligation pledge supporting the Pittsburgh & Allegheny Sports and Exhibition Authority’s lease revenue bonds.

S&P also affirmed the AA-minus rating on multiple priority-lien debt obligations with a linkage to the commonwealth under S&P’s priority-lien tax revenue debt criteria. These include the ratings on the Allegheny County Port Authority’s special revenue transportation bonds and the Southeastern Pennsylvania Transportation Authority’s bonds, public transportation assistance fund.

“The positive outlook on all long-term ratings reflects our view of a one-in-three chance that we could raise the rating over the next two years if the state demonstrates a commitment to structural budgetary solutions that narrow or close projected outyear gaps, while also preserving or increasing reserve balances in its budget stabilization reserve,” said Geoff Buswick, an S&P credit analyst.

Earlier this month, Moody’s Investors Service revised its outlook on Pennsylvania to positive from stable and affirmed the state’s Aa3 issuer and GO ratings. Additionally, Moody’s affirmed the state’s A1 and A2 ratings on outstanding appropriation backed debt, the A1 rating on the Pennsylvania School District Intercept Program and the A2 rating on the Pennsylvania General Municipal Pension System State Aid Program.

Moody’s also affirmed the A1 rating on Pennsylvania Turnpike Commission’s $992 million of outstanding motor license fund-enhanced turnpike subordinate special revenue bonds. The outlooks on all of these bonds have also been revised to positive from stable, Moody’s said.

Fitch Ratings assigns an AA-minus rating to the state’s GOs and has a positive outlook on the credit.