Posted on 03/03/2004 7:34:08 PM PST by calcowgirl
LOS ANGELES – In the first positive news for California's battered credit ratings in three years, two bond rating agencies issued slight improvements Wednesday to the state's credit status.
The minor boosts came a day after voters approved a $15 billion bond measure championed by Gov. Arnold Schwarzenegger to pay off $14 billion in short-term debt. State officials called Tuesday's bond the largest in U.S. municipal bond history.
State Controller Steve Westley called the improvements "a sign that Wall Street is pleased to see California beginning to head back in the right direction financially."
Standard and Poors, which last July downgraded the state government's credit ratings to just above junk bond status, cited "positive implications" Wednesday in making the change.
Moody's Investors Service changed the state's bond ratings outlook from negative to stable.
Neither firm actually upgraded the state's ratings, which determine interest rates and risk for investors buying state bonds.
But both moves represent the first positive movement since January 2001, when S&P issued its first downgrade amid fears of energy blackouts, rising electricity costs and negative financial consequences.
Moody's did the same amid the growing energy crisis in May 2001. Until Wednesday, their downgrades had routinely worsened, giving California's state government the worst credit ratings among 50 states.
"It's a welcome change from the steady stream of negative reports in recent years," said Schwarzenegger spokesman H.D. Palmer.
He said the positive and immediate response to the bond's passage shows California is now seen as serious about getting its finances in order under Schwarzenegger.
The two agencies still warned Wednesday that California's window of opportunity to balance its budget is slipping away.
In a statement, Moody's said the state needs to establish a budget reserve fund and show evidence of stronger financial management.
Standard and Poors credit analyst David Hitchcock said his firm will upgrade California's ratings "to the extent the state uses the time provided by the new bond proceeds to reduce its structural deficit."
That means erasing a $15 billion gap between revenue and spending that still looms over a budget for the new 2004-2005 fiscal year that begins on July 1.
State Treasurer Phil Angelides, who has called for a mixture of cuts and tax hikes, cited the reports as proof that "the hard work begins today."
Angelides has repeatedly criticized Schwarzenegger's budget cuts for their impact on the poor and called for raising income taxes on the richest 1 percent of Californians. He said that would raise $3 billion next year, and $2.4 billion the year after.
LA Times - Bonds a Stopgap Measure for Overspending in Budget
Prop. 57's success allows California to manage past debts. But another shortfall looms.SACRAMENTO — With the sureness of an emergency room physician, state Finance Director Donna Arduin offers this treatment protocol for an ailing California.
"When you have a patient that is critically ill, there are three steps that need to be taken," she said. "Stop the bleeding. Sustain their condition. And put them on the road to recovery."
The $15-billion deficit bond package approved by voters Tuesday stops the bleeding, Arduin said. But lawmakers and Gov. Arnold Schwarzenegger must move fast to keep California from lapsing into a coma because it faces another projected budget shortfall — this time, $17 billion — by summer.
"We still need to pass a [2004-05] budget that is fiscally sound, that over the next couple of years will bring us into structural balance," she said.
California Approves Bond Issue, but Fiscal Problems Remain
By JOHN M. BRODER
Published: March 4, 2004(snip)
Roughly $12 billion of the new borrowing will go to retire existing debt, much of which comes due in June. What sums that remain are to be used to patch holes in the budget for the fiscal year that starts July 1.After the current debt is retired, the state will still face a major gap between projected revenues and spending over the next several years. Mr. Schwarzenegger has proposed cuts in programs, including state health services and higher education, to reduce the gap, or "structural deficit." But the Democratic-controlled Legislature has balked, and the budget gridlock remains.
"We still have a structural deficit," said Donna Arduin, the state's chief budget officer. "And we still have a lot of difficult decisions to make and tough negotiations ahead."
Leon A. Panetta, a former California congressman who served as director of the Office of Management and Budget during the Clinton administration, said that adding $15 billion in new debt to the state's already overburdened budget was the worst possible solution — except for all the others.
"We're in a period of borrow and spend almost everywhere you look," said Mr. Panetta, who reluctantly supported the measure. "In the end, Governor Schwarzenegger is going to have to do exactly what George Bush should have done a long time ago, which is put everything on the table, both spending cuts as well as new revenues."
Given all the lies we are told (Unions, legislators, HJTA, etc.), it's amazing anyone gets it.
I used to trust the Ballot descriptions... never again!
Amen to that!
I twisted nothing. I posted the article, I didn't write it. My post had nothing to do with Arnold, it had to do with status of the bond issue and the ratings, as they affect the financial condition of the state. Being a taxpayer, it is something I care about and has alot to do with whether I will continue to be a resident of this state.
What could you possibly find negative in what Donna Arduin said to make your judgment that "it doesn't look like we'll see that structural balance for a while"...
If you read my posts, particularly the sentences highlighted, you would have noticed that the S&P analyst implied he would not upgrade the bond rating until the structural deficit was reduced. I posted the quote from Ms. Arduin, because she says the structural imbalance will be accomplished "over the next couple of years". The bond ratings directly effect the debt service costs.... the higher the rating, the more cost to the state (and the taxpayer). The fact that she does not see the budget being structurally in balance for several years is material to the equation and has not previously been published.
She's talking right here about passing a budget that covers the deficit... SPENDING CUTS.... that's what she's famous for and why Arnold brought her on board, remember? Or did you completely ignore that article because it put Arnold in a good light?
I believe I highlighted that sentence, did I not? The fact that it will be not be covered this year, or next year, but OVER THE NEXT COUPLE YEARS is what I was highlighting.My concern is about this State, my family's home for the past century. This has very little to do with Arnold or Ms. Arduin. I don't care how famous they are, or what they have accomplished in the past. I care about actions being taken now, by many parties, that affect the condition of this state.
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