Citing unfunded pension liabilities, high debt and slow to moderate growth the rating agency also changed it’s outlook for Pennsylvania from negative to stable.

On the upside, Moody’s says that the Government has improved with “two consecutive timely budgets, significantly reduced reliance on non-recurring resources, and a demonstrated willingness to balance revenue shortfalls early in the fiscal year”

Of the state’s economic outlook they cite “Diverse, broad, and relatively stable economy, with wealth levels slightly above the national average, buttressed by its large health and higher education sectors.”

As for what could lead to further degradation of the state’s credit rating Moody’s says “Further economic deterioration that leads to worse-than-expected revenue performance. Higher-than-budgeted depletion of reserves in the near term or an inability to restore budget stabilization fund over the medium term. Further liquidity decline that results in increased external cash flow borrowing, deferred payments, or other cash management tools, and growth in long-term liabilities, increase in fixed cost pressures, or additional deferral of pension costs.”