Wall Street firm chops California's credit rating

SF Chronicle | 7/25/03 | DON THOMPSON, Associated Press Writer

[randita]

Wall Street firm chops California's credit rating

DON THOMPSON, Associated Press Writer

Thursday, July 24, 2003

©2003 Associated Press

URL: http://sfchronicle.com/cgi-bin/article.cgi?file=/news/archive/2003/07/24/financial2126EDT0265.DTL

(07-24) 18:26 PDT SACRAMENTO (AP) --

SACRAMENTO (AP) -- California's credit rating, already the worst in the nation, was lowered to near junk bond status Thursday by one of the nation's top credit agencies.

Standard & Poor's cited the state's pending gubernatorial recall election and delays in adopting a new state budget to trim a record $38 billion deficit.

But the announcement came as Senate leaders announced a budget agreement that would cut the deficit to about $8 billion next year. Credit rating officials did not return telephone messages from The Associated Press seeking comment on the agreement, which is expected to be considered by senators Sunday.

State Treasurer Phil Angelides estimated the downgrade will cost taxpayers $1 billion over 30 years to borrow $24.1 billion that has already been authorized but not yet issued. The rating on that borrowing was lowered Thursday from A to BBB, two notches above junk bond status.

The credit agency simultaneously lowered its rating on the state's $6.7 billion of general fund lease-supported debt from A- to BBB- -- one notch above junk bonds.

The ratings had been on the agency's credit watch since July 2, after the state missed its budget deadline going into the new fiscal year.

California is operating for the first time in history completely on borrowed money -- cash that is expected to run out in September.

Controller Steve Westly called the downgrade "a calamity for California" and "unprecedented bad news that will send shock waves through the nation's financial markets."

Angelides blamed Republicans for both the stalemate and the effort to recall his fellow Democrat, Gov. Gray Davis, warning that, "continued political turmoil could do lasting damage to California's economy and its reputation in the financial markets."

But Assembly Republican Leader Dave Cox of Fair Oaks blamed "a group of liberal Democrats" for delaying the budget "to advance their political agenda."

Davis' finance director, Steve Peace, accused lawmakers of "playing chicken with the lives of Californians," noting the S&P rating is the lowest in California history.

Davis called the downgrading "our latest and loudest wake up call. It's imperative that the Legislature pass a budget and pass it quickly."

S&P analyst Alex Frasher said prior to the Senate announcement that even if the Legislature approves a new budget soon, his agency remains concerned about the big deficits the state continues to create. On the Net:

Read all three credit ratings at: beginnersinvest.about.com/gi/dynamic/offsite.htm?site=http%3A %2F%2Fww w.bondsonline.com%2Fasp%2Fresearch%2Fbondratings

©2003 Associated Press  

[randita]

Can bankruptcy be far behind?

[meenie]

This article is extremely kind. BBB is junk bond status.

[randita]

ping

[NormsRevenge]

Ouch! 8-\

That suckssmarts!

Recall Davi$ and toss the rest of the demRats in 2004

Go Tom!

---

Listen to demRat's Open Mike Night at the Capitol

Open Mic Catches California Democrats
(AP) - Unaware that a live microphone was broadcasting their words around the Capitol, Assembly Democrats meeting behind closed doors debated prolonging California's budget crisis for political gain. Members of the coalition of liberal Democrats talked about slowing progress on the budget as a means of increasing pressure on Republicans. A microphone had been left on during the closed meeting Monday, and the conversation was transmitted to about 500 "squawk boxes" that enable staff members, lobbyists and reporters to listen in on legislative meetings. More...

• Democrats' Budget Debate - Excerpts [PDF] (CA GOP Caucus)
• Calif. Budget Crisis (PPIC) | Message board

[Ernest_at_the_Beach]

Thanks for the ping!

calgov2002:

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[meenie]

Junk is in the eyes of the beholder. To me BBB is junk.