5 will get you 10 that the Democrats start suggesting criminal investigations against the ratings agencies for lowering their grade, just like they did against the energy companies...
Posted on 12/19/2002 9:46:13 PM PST by Robert357
Edited on 07/19/2004 2:10:46 PM PDT by Jim Robinson. [history]
New York, Dec. 19 (Bloomberg) -- California's bond rating was cut by Standard & Poor's because of a projected $34.8 billion budget deficit in the next two fiscal years, tying the most- populous U.S. state with Louisiana for the lowest credit rating.
(Excerpt) Read more at quote.bloomberg.com ...
I didn't see this posted anywhere else, but if it was, I apologize.
Davis will raise taxes.
5 will get you 10 that the Democrats start suggesting criminal investigations against the ratings agencies for lowering their grade, just like they did against the energy companies...
< /sarcasm>
NEW YORK (Standard & Poor's) Dec. 19, 2002--Standard & Poor's Ratings Services today lowered its ratings on California's $23.5 billion of GO bonds (excluding bonds also secured by veteran's housing revenues) to 'A' from 'A+', the state's $12.5 billion of revenue anticipation notes to 'SP-2' from 'SP-1', the state's commercial paper program to' A-2' from 'A-1', and the state's $6.4 billion of general fund lease-backed debt, issued by the California State Public Works Department, to 'A-' from 'A'.
The outlook is stable.
The downgrades follow Gov. Gray Davis' announcement yesterday of a projected general fund budget gap of $34 billion for fiscal 2004, absent corrective budget action. In particular, Standard & Poor's conversation with the state budget office indicates a sharply higher general fund deficit of about $10.4 billion for fiscal 2003, absent proposed corrective budget action, included in the $34 billion total. This level of deficit will likely exceed the state's level of other borrowable funds at year end, estimated earlier by the state at $6.4 billion, even if the governor's recently proposed $3.4 billion midyear fiscal 2003 cuts were implemented.
The state attributes $17.7 billion of the gap to revenues running below expected levels through fiscal 2004, $4.5 billion to expenditure increases and nonreceipt of budgeted federal funds, and $12.6 billion to onetime revenue items used in fiscal 2003 but unable to be repeated in fiscal 2004, including a $4.5 billion tobacco securitization sale expected in a few months. The new budget gap represents a sharp increase from a $21 billion comparative total gap the state legislative analyst projected only last month. The increased gap poses an enormous test for the state compared to the size of its annual budget. Fiscal 2003 general fund revenues were budgeted about $79 billion in fiscal 2003.
The impact of possible state cuts on aid to local governments and school districts will be reviewed when more detail on potential cuts becomes available. The governor's recently proposed $10.2 billion of midyear corrective budget action, only $3.4 million of which is attributable to fiscal 2003, can only represent a partial solution to the state's long-term structural budget problems.
Standard & Poor's will conduct a teleconference call at 4:30 p.m. ET today to discuss this rating action. The details for the conference call are listed below:
Live Dial-In Number: 1-712-257-2021
Call Confirmation# 4289569 Passcode: SANDP
Replay Number: 1-402-530-7896
These replays are available until Thursday December 26, 2002 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 Fixed Income in the left navigation bar, select Credit Ratings Actions.
It wouldn't surprise me once they find out how deeply the bond rating agencies are going to review proposed legislation and budgets.
It is clear that California is being told that they are very close to their credit limit and that Wall Street will only go so far. Wall Street will tell the Legislators what is an acceptable budget and what is not and then allow California to borrow or not borrow the funds it needs to meet its cash flow needs.
This is going to get real ugly and I wouldn't be surprised to start hearing Democrats start saying that bond analysts are not elected and have not business telling elected officials what they can or can not do for a budget.
BTW I think the best way to solve the California Budget crisis is to threaten to sell Catalina Island to Iraq or Iran for $35 Billion Dollars unless the Feds agree to purchase it first.
My cards say that Davis has sunk the state of California's chance of a quick economic recovery. He will be lucky if he gets the state economy going by the time he has to leave office.
When one puts off paying for things again and again and doesn't save for the future, one runs into a hard wall eventually. Davis and the Democratic legislature have run into the hard wall of Wall Street.
If you remember when NYC went broke and Wall Street formed commits to administer and advise on all City funds the pleas that were made, you will likely find a lot of insight into the future.
Your analysis is based upon the false premise that the citizens of California-- who elected the democrats who caused this mess and re-elected Gray Davis and Barbara Boxer-- can either read or think.
Lucky? Hey, with a 35 Bilion dollar deficit, it can't be done. If he raises taxes, the remaining big companies will pack up and move. The only way to get the California economy on track would be to change the tax base, eliminate the California income tax, eliminate California corporation taxes, and sell off half the land that the state of California owns to developers.
My startup company, which has been growing at an incredible rate (exceeding all revenue projections) is planning on doing just that to protect our business. The destination? Florida. We aren't going to get sucked dry for being part of the productive class.
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