Skip to comments.California GO, Lease Ratings Placed on CreditWatch Negative Due to Budget Uncertainty
Posted on 07/02/2003 3:34:16 PM PDT by Libloather
California GO, Lease Ratings Placed on CreditWatch Negative Due to Budget Uncertainty
David G Hitchcock, New York (1) 212-438-2022; Alexander M Fraser, Dallas (1) 214-871-1406
Publication date: 02-Jul-03, 12:46:50 EST Reprinted from RatingsDirect
NEW YORK (Standard & Poor's) July 2, 2003--Standard & Poor's Ratings Services said today it placed its 'A' rating on California's $26.8 billion general fund-supported general obligation debt and $6.7 billion state general fund lease-supported debt on CreditWatch with negative implications, reflecting the state's lack of progress in adopting a fiscal 2004 budget and the diminishing prospects that meaningful structural budget reform will result from an enacted budget.
In addition, should adoption of a state budget stretch into August, the potential exists for disruption of state operations and local entities dependent on state support--particularly community colleges, which cannot receive state aid in absence of a budget. State efforts to head off a potential cash flow shortfall may be hampered by covenants in recent state note-related credit lines that limit additional cash flow borrowing, in the absence of a state budget, to maturities extending after those for the $11 billion revenue anticipation warrants sold in June.
"Should a budget be adopted in a timely fashion, making progress toward solving recurring structural budget gaps, the CreditWatch designation could be removed," said Standard & Poor's credit analyst David G. Hitchcock. "However, Standard & Poor's will monitor the state's cash position during the current budget crisis and could potentially make a downward rating adjustment if a weak cash position significantly affects the state's ability to carry out its governmental functions."
Last year, state budget adoption occurred in early September despite a smaller budget gap and no major tax increases proposed by Gov. Gray Davis, as has been proposed by the governor this year. Nevertheless, general obligation debt payments and debt service for state public works board general fund lease debt can still be paid in absence of a state budget under existing continuing budget resolutions.
Adoption of a timely budget is currently hampered by state constitutional requirements for a two-thirds legislative majority and sharp differences of opinion in the legislature between the desire for tax increases and the avoidance of large budget cuts. Passage of a new budget may also be delayed due to the increasing likelihood that a recall petition for the governorship will make the ballot; the large number of relatively new and inexperienced legislators due to term limits; the drawing of legislative districts that have intensified partisan differences; intensified lobbying by various interest groups; the possibility of challenges to the state's recent implementation of motor vehicle license fee tax rate increases; and the enormous magnitude of the state's $38.2 billion projected accumulated budget gap, compared to fiscal 2003 total estimated general fund revenues of just $67.8 billion.
Positive state credit features include a very deep and diverse economy; a rising, but still moderately low, debt burden; and a progressive income tax structure that could show strong revenue growth in good economic times, although now showing weakness during the current economic sluggishness.
California's 'A' rating is the lowest of the 50 states rated by Standard & Poor's.
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Credit Ratings Actions.
So goes Cally...?
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5:46PM California's Angelides calls for budget on S&P move by Luisa Beltran
NEW YORK (CBS.MW) -- Standard & Poor's placed the state of California on creditwatch with negative implication, causing State Treasurer Phil Angelides on Wednesday to call for the state legislature to adopt a smart budget. If the S&P were to lower the state's credit rating down one notch to "A-," the move would result in about $400 million in borrowing costs. "The ongoing recall effort and the State's budget stalemate are damaging the State's financial standing and sending a dangerous message of political instability," Angelides said in a statement.
See your posted link URL at the beginning of your post... too funny!!! (grin)
"...the large number of relatively new and inexperienced legislators due to term limits; the drawing of legislative districts that have intensified partisan differences; intensified lobbying by various interest groups; the possibility of challenges to the state's recent implementation of motor vehicle license fee tax rate increases; and the enormous magnitude of the state's $38.2 billion projected accumulated budget gap..."
Can you say Pubic Employee Unions... Teachers, Guards, Cops, just to name a few. They're gonna go berserk!!!
One typo and everything turns to crap - eh?
Too funny !!!!!!!!!