Posted on 02/10/2003 4:25:01 PM PST by Robert357
Moody's has lowered the rating on $21.9 billion of outstanding State of California General Obligation bonds to A2 (with a stable outlook) from A1, and assigns this rating to the state's upcoming $900 million general obligation bond sale. In addition, we have lowered the rating on $5.5 billion in lease revenue bonds from A2 to A3. These rating actions reflect the magnitude of the imbalance between the state's revenues and expenditures, and the expectation the state will not be able to sufficiently address the imbalance in the upcoming fiscal year _ given the inherent obstacles to reaching consensus on solutions to the problem. Absent a stronger than anticipated state and national economic rebound this year, we expect deficits to persist beyond fiscal 2004. As a result, the state will likely rely on rollover financing in the short_term market to meets its cash flow needs over the next 18 months to two years.
TWO_YEAR DEFICIT ESTIMATED TO BE AT LEAST $26 BILLION; GOVERNOR SEEKS MAJOR CUTS AND TAX INCREASES
The governor's fiscal 2004 budget proposal released earlier this month seeks to address a structural deficit of $34.6 billion. The Legislative Analyst's Office (LAO) sizes the problem at approximately $8 billion less, due both to a slightly more optimistic revenue outlook and the conventions it uses towards projecting the spending baseline. The deficit reflects the severe fall_off in tax revenue collections due to the continued weak performance of the state and national economies and the weak stock market. The deficit is also driven by increased spending pressures attributable primarily to rising health care costs. Even by the LAO's accounting, the size of the deficit is larger as a percentage of the annual budget (nearly 23%) than any shortfall in California history, and among the largest of the U.S. states. Dramatic budget actions will be required to restore structural budget balance.....
......Due to the state's tight cash position, we see a high likelihood that the state will need to issue revenue anticipation warrants before the end of the current fiscal year.
Moody's expects the state to need to size the anticipated RAWs to fully retire any maturing 2003 RANs for which sufficient cash is not available, and to cover its cash flow needs through the first quarter of fiscal 2004 should adoption of the fiscal 2004 budget be delayed as expected. We anticipate the state will successfully place its revenue anticipation warrants for such purposes. In addition, we expect that sufficient current year budget adjustments will be made to allow the state to retire the $9.5 billion notes maturing June 20, 2003 with available cash from operations. In the case of the notes maturing June 27th, we expect the state will rely on RAW proceeds to retire at least some portion of these notes. Based on these expectations, Moody's affirms its MIG1 and MIG2 ratings on the state's 2003 RANs......
.....Moody's credit outlook for California's long_term debt is revised to stable at the A2 rating. Despite the negative affect the under_performance of the high technology continues to have on the Bay Area economy, the state's significant economic diversity should enable the state economy to keep pace with the nation over the near term. We anticipate the legislature will take various actions during the current legislative session to reduce the size of the current shortfall, but _ given the size of the projected structural deficit _ not fully solve the problem within the 2004 fiscal year. As a result, the state will need to continue to rely heavily on the short_term market to meet its cash flow needs at least through fiscal 2004. However, while reliance on the short_term market presents a measure of market confidence risk, Moody's expects the state to successfully access the short_term market in the near term. Additionally, the stable outlook is predicated on the expectation of positive, albeit moderate, state economic growth by the end of the current calendar year. Any further deterioration in the state and national economies, or the legislature's inability to make sufficient progress in addressing the state's structural imbalance during the current legislative session, will necessarily place further negative pressure on the state's current rating and outlook.
(Excerpt) Read more at moodys.com ...
What a mess.
But California always believes they are somehow exempt from the business cycle.
You can throw at least another 35 states and that financial red zone heap.
Absent a stronger than anticipated state and national economic rebound this year, we expect deficits to persist beyond fiscal 2004.
As a result, the state will likely rely on rollover financing in the short_term market to meets its cash flow needs over the next 18 months to two years.
I read this as the state legislators and leaders will wimp out.
Why give them another chance next election?
No, we're in the financial Blue Zone.
When California got itself into trouble with its electricity re-regulation program circa 1996-2002, it sent its state prosecutors on the warpath against the electric companies.Watch for the state to repeat that attack on bankers and bond traders as soon as the state gets into serious financial problems.
I expect the same pattern to be repeated when California has a water shortage, also.
Now the State is adding a "use tax" on the sale of all second homes. Principal residences can't be far behind.
That's rough. It's going to be tough to generate revenue without a revolt, I'd say.
We may have our share of freeloaders, just like Florida, however, California remains, the 5th, *largest* economy on the planet. It does not get that title from being a state of freeloaders. Florida can't touch Cal as business goes. California is an economic giant with the nations largest ports etc etc. Even in a bad economy, no state comes close.
Move. Come to Florida. No state income tax, sales tax 6-7%, no emissions check, buy all the guns you want; no restriction, no registration.
Just so you know, California, has more guns in private hands than *any* state. Many times more.
Oh, and I have been to Florida several times for visits. I found the weather in the summer is almost uninhabitable, I mean 90 degrees with humidity to match. I mean, those that like hot, brutal, steamy humid climates, will love Florida. Oh, and I found the flat terrain to be very boring.
Good luck in Florida.
Oh, and just so you understand, Grey Davis and Barbra Boxer are from your side of the country. NY.....LOL!
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