S&P upgrades California's financial outlook
California got another bump from Standard & Poor’s on Tuesday as the rating agency upgraded the state’s financial outlook from “stable” to “positive.”
The agency’s analyst, Gabriel Petek, said the state has “corrected a significant portion of its budget imbalance” by cutting spending. That means California’s credit rating of A-, the lowest of any state, is poised for improvement.
“We are going on a limb here and saying that there’s at least a 1 in 3 chance that within the next two years we’ll raise the state’s bond rating,” Petek said.
The state has been climbing in the ratings –- it was boosted from “negative” to “stable” in July.
“The fact that California’s ratings outlook has shifted from negative to positive in less than a year is a powerful vote of confidence in our state,” Gov. Jerry Brown said in a statement. “Let’s keep the momentum going.”
Senate Republican Leader Bob Huff (R-Diamond Bar) downplayed the S&P upgrade, noting "serious questions" about whether budget predictions will prove accurate.
"Our rating is still near the bottom when compared to other states," he said in a statement. "While this is movement in the right direction, Californians should delay celebration until we’re closer to the top than the bottom.”
Hampering the state’s financial outlook is the continuing disconnect between budget predictions and cash flow. Even as the deficit has shrunk, the state still spends more and collects less money than it expects to.
Last month Controller John Chiang, who monitors the state’s cash flow, warned that the state could dip into the red in early March.
Gov. Jerry Brown signed legislation earlier this month to increase the state’s ability to borrow from dedicated funds to cover day-to-day expenses. The state also plans to delay payments to doctors in the Medi-Cal program and borrow money from public universities.
-- Chris Megerian in Sacramento