Pennsylvania at Modern Record for Its Longest Budget Impasse

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The statue of Rocky stands at the Philadelphia Museum of Art in Philadelphia.

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  • Democratic governor, Republican lawmakers can't agree on plan
  • Schools, state credit rating threatened as stalemate drags on

Pennsylvania broke the record for the longest budget impasse in modern state history on Thursday, now at 177 days, after lawmakers advanced a scaled-down spending plan that Governor Tom Wolf is signaling he will veto.

The longest budget standoff had previously been in 2003, when lawmakers passed a spending plan on Dec. 23, said Mike Stoll, a spokesman for the House appropriations committee. The current impasse is dragging on as Wolf, a first-term Democrat, and the Republican-led legislature can’t agree on a spending plan for the year that began in July. The delay is threatening Pennsylvania’s credit rating and has investors demanding higher yields on its debt.

The Pennsylvania House of Representatives on Tuesday put aside a stop-gap budget that Wolf’s office has said he will veto and instead advanced a complete spending plan that the state Senate passed this month, a sign that a deal could be close. Yet the Senate didn’t send that budget to Wolf, opting rather to seek approval for a smaller version that has less funding for education than the governor wants.

“A historic compromise budget that included the largest increase in education funding in history, reforms in public pensions, and a reduction in the deficit was within reach,” Wolf said in a statement on Wednesday. “It is deeply disappointing that today the Senate has caved to those same House leaders and extreme interests to continue the failed status quo and harm our schools and children by denying them these critical additional funds.”

“We must continue our fight for historic education funding that will begin to restore the cuts from five years ago, and a budget that is balanced, paid for, and fixes our deficit,” he said.

Moody’s Investors Service lowered Pennsylvania’s credit rating outlook on $10.9 billion of general-obligation bonds to negative from stable in October. The securities are rated Aa3, the fourth highest investment grade level. This week, Moody’s cut the Philadelphia Corporation for Aging, a non-profit that relies on funding from the state, deeper into junk because of the budget stalemate.

Philadelphia schools may close after January without a budget as they rely on state aid. The district, the state’s largest, said its ability to keep schools open and pay teachers and bills after Jan. 29 is “uncertain,” Superintendent William Hite Jr. said in a letter to employees this month.

Investors demanded about 0.44 percentage points of extra yield to own 30-year Pennsylvania bonds on Dec. 23 versus benchmark munis. Only Illinois, New Jersey and Connecticut pay more, according to data on 20 states tracked by Bloomberg.

In the 1950s, the state ran on several stop-gaps for about two years, according to Stephen Miskin, a spokesman for House Majority Leader Dave Reed, a Republican.

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