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Standard & Poor's endorses bigger California reserve fund

June 29, 2012 |  9:06 am

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Democratic lawmakers and Gov. Jerry Brown have spent months disagreeing over how much money California should sock away in a rainy day fund.

Lawmakers wanted to use some of the money on social services, but Brown insisted on keeping about $1 billion in reserve, and he used a series of vetoes this week to meet that goal.

On Friday, the Standard & Poor's rating agency came down on Brown's side, saying keeping more money in the reserve fund was the right move.

"Some uncertainty surrounds the amount of revenue assumed in the budget from the now-dissolved redevelopment agencies and the volatility of state revenue generally," a new report said. "The reserve helps partially mitigate the potential for these to fall short of budget assumptions."

Overall, Standard & Poor's said, the budget enacted this week is consistent with the positive financial outlook the ratings agency awarded the state earlier this year. That means California's credit rating of A-, the lowest of any state, remains poised for improvement.

If voters approve Brown's tax plan in November, general fund spending would increase almost 5% in the upcoming fiscal year. But Standard & Poor's said "we nevertheless view the budget as restrained," noting that the increase is largely due to circumstances out of Capitol leaders' control -- a voter mandate on education funding and the requirement to pay back debt incurred three years ago.

RELATED: 

Gov. Jerry Brown signs California budget

State parks to remain open despite budget cuts, officials say

With vetoes, Gov. Jerry Brown disappoints some fellow Democrats

-- Chris Megerian in Sacramento

twitter.com/chrismegerian

Photo: Gov. Jerry Brown, center, at a news conference with Assembly Speaker John Pérez, left, and Senate President Pro Tem Darrell Steinberg last year. Credit: Hector Amezcua / Associated Press

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