Posted on 07/06/2009 2:37:44 PM PDT by rabscuttle385
Fitch Ratings cut California's long-term general obligation bond rating by two notches to BBB, the second cut on the rating since late June, based on the state's inability to achieve an agreement on its budget and cash flow solutions amid its severe financial crisis.
Legislators in the state have been deadlocked for more than a month on ways to close what is now a $26 billion deficit in a $92 billion general-fund budget. The state plans to issue a little over $3 billion in IOUs to thousands of creditors this month after lawmakers failed to come to an agreement on a way to close the massive budget deficit.
Republican Gov. Arnold Schwarzenegger and Democrats, who control the legislature, have been locked into a battle as to how to fix the state's budget problems. Schwarzenegger has sought deep cuts and some so-called revenue accelerations, while Democrats countered with a $21 billion proposal that includes $11 billion of cuts and relies more heavily on accounting gimmicks and one-time fixes.
Fitch also kept the ratings on watch for downgrade, after an agreement wasn't reached by the end of the state's fiscal year on June 30. The ratings short-term risk includes concerns that if gridlock between politicians continues, it would further aggravate the state's already severe economic, revenue and liquidity challenges and weigh on the state's credit.
The BBB rating, which is two notches above junk territory, indicates Fitch's view that default risk remains low, although the rating is well below that of most other tax-supported issuers. A handful of the state's appropriation bonds were downgraded to BBB- and put on watch for downgrade, including some building and financial authorities.
(Excerpt) Read more at online.wsj.com ...
Thanks for the heads up. Looks like California will financially implode before the New Year.
Don’t bother me until after the Michael Jackson funeral!
/sarc
The Cali moonbats need to spend more, that should do it.
Apparently the IOUs that were issued are tranferable.
They are now being bargained for pennies on the dollar. I wouldn’t do business with the state of California unless I was given cash up-front.
Which is exactly how those issuing junk bonds should be dealt with.
I'm seeing 70c to 95c on LA craigslist: http://losangeles.craigslist.org/search/sss?query=california+iou&minAsk=min&maxAsk=max
If I needed to pay a lot of money to some state office, I'd be happy to buy what I needed at face value to help out somebody who needed to sell them, but I would do it only as a three-person transaction right at the state office in question (in fact I might try this at the DMV later this month). And that's because I don't trust the state to pay me as a third party in October.
Also, and this may be more quixotic justification than anything else, enabling a market for these things allows the system to continue to limp along. It must fail!
I live in this state and I say “right on”. The libs have been running this state for 30 years. Reap what you sow, and all that.
This while Assembly Speaker Karen Bass (D - Los Angeles) boycotts the budget talks.
Taxpayers due refunds on their CA income taxes are given IOUs.
I better understand now why people go postal.
...in other news, Democrats refused the notion of ending the lifetime pensions and benefits for state workers...
The feds are also insolvent. I wonder how long until their rating gets cut.
I long for the day when the federal government has to scale back to a level for which it can REALLY fund. Their days of printing and spending money they don’t have, and doesn’t even exist MUST come to an eventual end. They can’t continue this way forever.
It looks like the failed state of California is facing that reality now. This is lots of fun to watch!
If Democrats win the Governorship, don’t be surprised if he pushes for a state stimulous bill of some kind. Ugh, I’m so glad to be out of that state.
You chicken! Git right back here and help us fight the slobering fools in Sacramento!! Where the heck did you go that was so much better???
This is third world sh**t when you have IOUs trading on the black market. Zimbabwe here we come. CA can take down the whole country as long as the illegals are protected.
From those of us who love watching a good train wreck... let’s just sit back and let this thing spin for awhile!
It just goes to show you how much stupid money is left in the system. Or, is it smart money????
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