MuniMetrics MVP v6.6.5

# Senior Credit Analyst Summary ## 1. Executive Credit View Preliminary implication: **Watch**. The provided excerpt is primarily from the Commonwealth of Pennsylvania’s FY2025 Annual Comprehensive Financial Report table of contents and selected temporary-funding scan excerpts. It does **not** include the bond offering statement, security pledge language, debt service schedule, ratings, call provisions, or full audited financial statements needed to support a final Buy / Watch / Pass view. Credit view is **preliminary only**. The Commonwealth appears to have formal audited financial reporting infrastructure, including an ACFR and independent auditor section referenced in the table of contents, but the excerpt also identifies meaningful federal temporary funding exposure, including ARPA / State Fiscal Recovery Funds, expired ESSER / GEER education grants, and reallocated COVID-19 Response Restricted Account funds for the Department of Corrections. These items require follow-up to determine whether reported FY2025 results overstate recurring operating strength. ## 2. Issuer and Bond Facts Extracted | Item | Extracted Information | |---|---| | Issuer | Commonwealth of Pennsylvania. Page 3. | | Bond name | Commonwealth of Pennsylvania — General Obligation Bonds, First Series of 2026 and First Refunding Series of 2026 is provided in the analyst context, but **not identified in provided excerpt**. | | Par amount | Not identified in provided excerpt. | | Bond type | General Obligation is provided in the analyst context, but **not identified in provided excerpt**. | | Security pledge | Not identified in provided excerpt. | | Purpose | Not identified in provided excerpt. | | Maturity range | Not identified in provided excerpt. | | Rating | Not identified in provided excerpt. | | Underwriter | Not identified in provided excerpt. | | Bond counsel | Not identified in provided excerpt. | | Municipal advisor | Not identified in provided excerpt. | | Registrar / paying agent | Not identified in provided excerpt. | | Tax status | Not identified in provided excerpt. | | Source document identified | Annual Comprehensive Financial Report for the fiscal year ended June 30, 2025. Page 3. | | Prepared by | Office of the Budget. Page 3. | | Governor | Josh Shapiro. Page 3. | ## 3. Security and Bond Structure Analysis The provided excerpt does **not** include the bond offering document or legal security provisions. Therefore: - Repayment pledge: **Not identified in provided excerpt.** - Whether the bonds are full faith and credit general obligations: **Not identified in provided excerpt.** - Appropriation mechanics, constitutional provisions, or statutory lien: **Not identified in provided excerpt.** - Debt service schedule: **Not identified in provided excerpt.** - Call / redemption features: **Not identified in provided excerpt.** - Refunding structure and savings: **Not identified in provided excerpt.** - Additional bonds test or legal debt limit application to this issue: **Not identified in provided excerpt.** The ACFR table of contents indicates that the statistical section includes “Outstanding Debt and Outstanding Debt Ratios,” “Ratios of General Obligation Bonded Debt Outstanding,” and “Computation of Legal Debt Margin.” Page 6. However, the actual tables and metrics are **not included** in the provided excerpt. ## 4. Credit Strengths Supported credit positives from the excerpt include: 1. **Formal ACFR reporting framework** The Commonwealth prepared an Annual Comprehensive Financial Report for FY2025. Page 3. 2. **Independent audit section exists in the ACFR** The table of contents references a “Report of Independent Auditors.” Page 4. The actual audit opinion is not included in the excerpt. 3. **Comprehensive financial disclosure structure** The table of contents shows government-wide statements, governmental fund statements, proprietary funds, fiduciary funds, component unit statements, notes, required supplementary information, and statistical tables. Pages 4-6. 4. **Budget stabilization transfer identified** A $737 transfer was made into the Rainy Day Fund Pool for budget stabilization according to the Fiscal Code. Page 33. This is a potential liquidity / reserve positive, but the source and recurring nature of the transfer are not identified in the excerpt. 5. **Debt and legal debt margin reporting appear available in the full ACFR** The statistical section includes tables for outstanding debt, GO bonded debt ratios, and legal debt margin. Page 6. Actual figures are not provided in the excerpt. ## 5. Credit Risks and Watch Items 1. **Insufficient bond-specific disclosure in excerpt** No par amount, final maturity, coupon structure, debt service, security pledge, ratings, or call features are provided. 2. **Temporary federal funding exposure** The excerpt identifies ARPA / State Fiscal Recovery Funds, COVID-19 Response Restricted Account reallocation, ESSER / GEER expiration, and federal grant recognition. Pages 10, 28, 34, 35, 173. 3. **Potential operating support concern for Department of Corrections** Act 54 of 2024 reallocated unexpended ARPA funds from the COVID-19 Response Restricted Account to be utilized by the Department of Corrections. Page 10. The use is not specified. Because corrections is a recurring governmental function, analyst follow-up is needed to determine whether temporary funds supported recurring operations. 4. **Education-related temporary grant expiration** Payments owed to the Pennsylvania Department of Education from the federal government decreased by $845 because COVID grants associated with ESSER and GEER expired in fall 2024. Page 28. This suggests prior federal grant activity was nonrecurring. 5. **Potential reserve-growth quality question** The $737 transfer to the Rainy Day Fund Pool is a credit positive if supported by recurring surplus, but the excerpt does not identify the source of funds. Page 33. If the transfer was indirectly supported by temporary or one-time resources, recurring reserve strength may be overstated. 6. **Pension / OPEB data referenced but not provided** The ACFR table of contents references pension and OPEB schedules. Page 4. Actual funded status, liabilities, contribution adequacy, and trends are not included in the excerpt. 7. **Debt burden data referenced but not provided** Debt ratios and legal debt margin tables are referenced in the statistical section. Page 6. Actual debt burden is not included. 8. **FEMA refund / program integrity item** Overpayment refunds increased due to a $39 refund paid to FEMA for Lost Wage Assistance program fraudulent claims. Page 39. This appears more like a compliance / recoupment item than operating support, but follow-up may be warranted. ## 6. Temporary / Artificial Funding Exposure | Source / Program | Amount | Fiscal Year / Period | Apparent Use of Funds | Classification | Risk Level | Why It Matters to Recurring Credit Strength | Page | |---|---:|---|---|---|---|---|---| | American Rescue Plan Act / COVID-19 Response Restricted Account reallocation under Act 54 of 2024 | Amount not identified in excerpt | Funds unexpended, uncommitted, and unencumbered as of Dec. 30, 2024 | Reallocated to be utilized by the Department of Corrections | Temporary Funding / Unclear Operating Use | **Medium** | ARPA funds are temporary. Use by the Department of Corrections could indicate support for a recurring operating function, but the excerpt does not specify payroll, operations, capital, or one-time use. Requires follow-up. | Page 10 | | Federal Coronavirus State Fiscal Recovery Fund monies under ARPA | $7,291 stated; separate excerpt states $7,291,328 from SLFRF | Received May 2021; unspent amount at June 30, 2025 also noted | State Fiscal Recovery Funds; specific uses not identified in excerpt | Temporary Funding | **Medium** | ARPA / fiscal recovery monies are nonrecurring. The excerpt does not identify whether funds supported operations, capital, reserves, or pass-through programs. | Pages 34, 173 | | Unspent State Fiscal Recovery Funds / unearned revenue | $216 unearned revenue at June 30, 2025; $308 decrease from prior year | At June 30, 2025 | Unspent SFR funds recorded as unearned revenue | Restricted / Temporary Funding | **Low to Medium** | Remaining unearned revenue suggests funds were not yet fully recognized. Risk depends on whether future recognition supports recurring spending. Use is not identified in excerpt. | Page 34 / Page 35 excerpt | | ESSER and GEER COVID education grants | $845 decrease in payments owed to PDE from federal government | Grants expired in fall 2024 | COVID education expenditures / payments owed to Pennsylvania Department of Education | Temporary Funding / Reimbursement Funding | **Medium** | ESSER and GEER were temporary pandemic education programs. Expiration reduces federal reimbursement / grant activity. Need to know whether state or local recurring education costs replaced the expired federal support. | Page 28 | | Federal Emergency Management Agency / Lost Wage Assistance refund | $39 refund paid to FEMA | FY2025 context not further specified | Refund for Lost Wage Assistance program fraudulent claims | Reimbursement / Recoupment; not operating support identified | **Low** | This does not appear to support recurring operations; rather, it is a repayment / refund item. It may indicate federal program compliance exposure. | Page 39 |