This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Pennsylvania Budget Secretary Announces Successful $950 Million General Obligation Bond Sale





Pennsylvania Receives Lowest Interest Rate Ever; Ratings Agencies Caution about Increasing Pension Obligations

HARRISBURG, Pa., April 12, 2013 /PRNewswire-USNewswire/ -- PA Budget Secretary Charles B. Zogby today announced the successful close of a $950 million General Obligation Bond sale. 

Bank of America Merrill Lynch was the successful bidder, offering a 2.904 percent interest rate. Six companies offered bids.

The proceeds of this bond sale allow the commonwealth to finance its public capital projects, provide grants to local water and sewer projects, and provide funding for Growing Greener—a grant program aimed at addressing critical environmental concerns across the state.

This sale yielded the lowest interest rate ever due to, in large part, the commonwealth's strong fiscal management. In addition, Fitch Ratings, Moody's Investor Service and Standard & Poor's have acknowledged the commonwealth's relatively strong financial position when rating its bonds. 

Under Governor Corbett's administration, the state passed two on-time budgets, improved jobs outlooks, balanced revenue shortfalls and reduced reliance on non-recurring revenues. All of these factors were cited by the rating agencies as contributing to the second highest rating from all three services. 

However, all three rating agencies also pointed to increased pension contributions and growing unfunded liability in the public pension systems as having a potentially negative impact on the commonwealth's ratings which, in turn, could affect the interest rate the state pays to fund its capital debt.

Fitch Ratings points to a negative rating outlook and reflects its concern with "expected significant growth in annual pension funding obligations."  It also states that maintaining the current "AA+" rating will "depend upon the commonwealth's ability to stabilize the downward trajectory in pension funding levels while continuing a commitment towards fiscal balance and replenishing reserves."

Standard & Poor's notes that it has "the potential…to lower the state rating to 'AA-'  in the next two years in the absence of meaningful pension reform efforts or significant economic growth that would help mitigate the impact of growing pension costs on Pennsylvania."   

Moody's has echoed these concerns, stating, "the commonwealth will experience significant budgetary pressure over the next five years as the pension contribution increases...the unfunded liability is projected to grow to $65 billion from the current $41 billion, materially increasing the commonwealth's adjusted debt ratio."

As part of his 2013-14 Executive Budget, Governor Corbett introduced his pension reform proposal. It calls for temporary reductions in the steep year-over-year employer contribution increases, introduces a defined contribution plan for new employees, and proposes changes to the future benefits for existing public and school district employees. This proposal will be part of the general budget negotiations over the next three months.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs