California's credit rating cut to lowest of all 50 states

California today was branded the worst credit risk of all 50 states, after Standard & Poor’s cut its rating on the state’s debt because of the budget impasse.

S&P lowered its rating on the state’s $46 billion in general obligation bonds to "A" from "A-plus," citing "the state's inability to reach an agreement on a mid-year budget revision and its rapidly eroding cash position."

Until now, California and Louisiana had been tied for last place, at "A-plus," on S&P’s state ratings list. Most states are rated either "AA" or "AAA."

"At its current level, the rating generally recognizes our view of the lack of political progress around the budget negotiations that we believe is serving to exacerbate the state's current and projected cash position," S&P said.

The Legislature and Gov. Arnold Schwarzenegger have been at odds over how to close the yawning budget gap, estimated at $42 billion through fiscal 2010.

What’s more, S&P warned, "Despite what we consider the state's strong longer-term economic fundamentals, we judge prospects for an imminent or brisk economic and revenue recovery to be unlikely."

The ratings firm also wasn’t swayed by potential help from Washington in the fiscal-stimulus package for the economy that Congress now is debating.

Despite its money woes, California can't arbitrarily decide to default on its debts; the state Constitution mandates that debt principal and interest must be paid as promised.

But a lower credit rating can lead investors to demand higher interest rates on new bonds the state sells for infrastructure projects, or on short-term debt issued for cash management purposes.

S&P's rival, Moody's Investors Service, still has California tied with Louisiana for the lowest credit rating among the states, at "A1." But Moody's warned on Jan. 21 that it may cut the state's rating if the budget battle drags on.

-- Tom Petruno

Comments

[RB]

Wow,
Good job legislature!
Good job Governor!

You are now officially incompetent!

[deBeer]

Highest number of illegal immigrants and their children, Biggest debt and lowest credit rating. Anyone surprised?

[Peter]

We are number 50 in credit worthiness, but number 1 in police officer, fire fighter and prison guard salaries and pensions. This is the bubble that needs to be corrected before we can recover solvency yet not one politician of either party is talking about this.

[dumb]

Always blaming the illegals immigrants! Get a clue illegals dont run this state, politicians do!!!!!!!

[Echo]

We really need to repeal Prop 13.

This state has been foregoing much needed property tax revenue for far too long.

[Daniel]

Time to Recall the Governor and the entire legislature. Through in all the other state-wide elected officials while we are at it.

Next we need a Constitutional Convention to fix this mess.

[Chuck%20Stewart]

Please stop bashing illegal immigrants. It just shows your bigotry and ignorance.

[Adam Berkowitz]

Our Governor is a disaster! He was supposed to fix our budget problems and instead he made it worse! He's going to hopefully be our last "business executive" to run the state. We need to readjust prop 13 or we are going to end up looking like Louisiana.

[ross]

What kills me about the "No New Taxes" crowd is that our poor credit rating is costing us far more than any tax increase. The only way this state can sell bonds is by offering investors a high return rate which we the taxpayers must pay. So to those who worship the at the alter of "No New Taxes," please realize that you legislative heroes may not be raising your taxes but they're picking your pocket clean nonetheless.

[Bry]

What I want to know is how we allow out state politicians and leaders to escape the cuts and layoffs that many in this state are feeling. Aren't they supposed to be leading by example? I would have thought that when Sacramento wasn't able to pass a budget, THEIR salaries would be the first to be cut instead of the thousands of teachers, government employees and others in this state keep daily life running. Why are they getting free passes to continue "debating" theory when working people are suffering? If they really cared for their constituents, they would share the burden of this falling economy. Maybe that will get their attention that they need to act NOW.

[Tom]

Oh yeah, Echo, repealing Prop 13 is going to solve everything. That would just give state government that much more to waste away and in the end, we'd just spend more, and back into just as much or more deficit. Why should we keep giving the state more money, when we are the most taxed state in the nation. Just hogwash. If the legislature can't balance the budget with the money they have, they don't deserve to be legislating

[Al]

We need chain saw Mike in the office. Oh, I almost forgot. The California Gov is not run like a Commercial Business. I use to get a sizable refund from the state. At least this year I have to wait, Not any more. Changed my W4 and stopped that. Last time I trust these guys.

[Bob N]

If the peolple of California are waiting for any politician or any political party to fix your problems you will be in deep sh!t for a very long time. Government will only create more beaurocracy and the need for more money and more power. Your state has been a leader in political evolution and along with New York show the rest of us just how bad things can get when we rely on our elcted officials. It's either Anarchy or Libertatianism, pick your poison.

[BLW]

It's the last thing to do is repeal Prop. 13. The legislators needs to prove to the people that they need to be fiscally responsible again. Repealing it will make more money to the state that legislators will waste.

What the state needs is accountability and responsibility. What needs to be done is tie the legislators' (and governor) paychecks to the budget. If they don't get a budget passed, they don't get paid...PERIOD. This is a better solution than repealing Prop. 13. Why punish the people when it's legislators (and governor's) are the one's to blame?

[Tommy]

"illegal immigrants and their children" - children who happen to be U.S. Citizens, yes? Let's stop scapegoating Latinos and the poor and blame the ones actually responsible: our idiot Governor and incompetent legislature, both of whom are too idealogically partisan and prideful to solve this impasse.

[pitbullstew]

DONT BLAME ME i DIDNT VOTE FOR ARNOLD, I THOUGHT IT WAS A TERRIBLE MISTAKE, HAVING SAID THAT? DO YOU THINK HE SHOULD RESIGN? AFTER ALL HE STOLE THE OFFICE FROM DAVIS?
HE SAID HE CAME TO SERVE ON THE ECONOMY AND IT IS WORSE NOW THAT HE HAS BEEN GOVERNOR?

[Kyle in Santa Barbara]

Stop blaming immigrants. It's the officials that voting citizens put into office that have created this predicament.

And repeal Prop 13! The shortsightedness of this proposition is now apparent to us all.

[Brad]

Recall Arnold and repeal the 2/3 majority requirement for a state budget and tax increases. Then, we can really hold the democrats accountable if they don't pass sound budgets. However, right now the whole state is being held hostage by Arnold and 6 Republicans in the Legislature that won't do their jobs. Honestly, I didn't expect things to turn out any better than they are when people elected an uneducated actor who wasn't even from California to run the Golden State. What a joke. Too bad its not funny.

[Jeremy%20R]

"We are number 50 in credit worthiness, but number 1 in police officer, fire fighter and prison guard salaries and pensions. This is the bubble that needs to be corrected before we can recover solvency yet not one politician of either party is talking about this."

Its all about property values.

Prop 13 was passed because overspeculation in CA causes housing to be too expensive.

You have to pay fire fighters 120k because to live well in their communities, they must own 600k+ homes.

If homes were cheap and stayed cheap, then government workers would get paid far less, and we could repeal prop 13.

[I. Labdo]

Recall Karen Bass and the governator.

[Ron]

"Heck of a job Arnie," you've Bushified the state. Now maybe the majority of Californians will get a clue and elect someone with brains to run our state government.

[independent skeptic]

Spending increased 40% over the last 5 yrs in CA. You want a place to start cutting? How about needless spending increases.

The Dems have done to California what the Reps did at the National level.

Let's call a duck a duck.

[johnny]

California is being raped and pillaged by its elected officials, and its greedy gate-keepers

[Valerie]

BLW you're a fool. First off, the Governor doesn't get a wage, he hasn't taken a pay since taking office.
Second, to all those idiots who think illegals don't take a toll on this State, who do you think is paying for all those "US Citizens" the babies they cross the border to have. Who pays those hospital bills, who pays every time they go to emergency for a cold or what ever. What about the one third of forclosures that were from loans to illegals. What about funding illegals to attend local schools.
Illegals have lowered the average wage by working for nothing, of which, none of that money stays in the country, it's all sent back to Mexico, so not helping the State in any way.

[John in Sherman Oaks]

My God, what a mess: the budget situation and all the comments about the causes! As for the causes, I think they're all true to some extent but underlying it all is: GREED, ARROGANCE, ENTITLEMENT and nice weather.

[Mark]

Same-sex marriage was bringing in some revenue, but the voters decided that they preferred feeling smug and moralistic over generating revenue.

[Albert R McConnell]

Number one, read Los Angles Times on the cost of illegal immigrants, about the cost of the budget we are in the red.
Number two, stop promising things to get elected, with no way to pay for them.
Number three, stop promising Unions the things you stand for, to get their money.
I see no way to solve budget problems in the near term, until you solve the above problems.

[Steven]

Illegal immigrants and their descendents (who are unfortunately legal - But shouldn't be if lawmakers did what the people want. That's a law that needs to be changed because it's been abused by illegal immigrants with anchor babies) have a lot to do with the problems of CA. We can blame them and the scumbags in Sacramento. These aren't the only factors but there are significant ones. Excessive pensions, lobbyists, labor unions all need to be abolished. That would be a start. And stop bringing up the racist card you la raza freaks. Don't try to blur the difference between immigrants and illegal aliens. Were tired of those baseless arguements.

[Steven]

We can certainly blame Illegal aliens. If they didn't come here taxpayers wouldn't have to spend any money on them.

[Duane]

What do you expect from a State that is several billion dollars in the hole, but still finds the money for a "Commission on Self Esteem?" And yes, it IS the illegal aleins, OOPS, undocumented persons< that are causing much of the problem. Lefties love to call that a racist comment, but it is a fact.

[Jim%20in%20Pasadena]

Cali has the highest income taxes, highest sales taxes but the lowest credit rating of 50 states. Why? Public employee unions own the legislature, $70k prison guards averaging $130k take home, ex leftist legislators like Midgen and Kuehl rotating into $132k, $11,000 per monthly Waste Board meetings, huge increases in State staffing levels, fat legislative staff pay hikes and pensions, ad nauseum. but the legislature refuses to cutback pay and perks for itself or its special interests. Cali has a spending problem resulting from waste, greed and corruption, not a revenue problem. Higher taxes will destroy what is left of this state.

[independent skeptic]

This is a perfect opportunity for the state to file bankruptcy. This will give the state the power to unilaterally change union contracts and get them to where they need to be. The unions, along with their Democrat stewards, have bankrupted the state by awarding sweetheart deals involving rich benefit packages and guaranteed pay increases REGARDLESS OF PERFORMANCE.

This is antithetical to what we ought to strive to be: a meritocracy.

[August]

My wife & I and our business solved the California budget crisis.....We moved out of state! Hasta La Vista Baby!

[MrCori]

Thats what California gets for voting in a bunch of feel good, tax and spend liberals! You're so proud to be liberal, thats what you get! What did California perform like when conservatives ran it? I thought Californians were supposed to be so smart.

Who the hell votes in an illiterate, un-educated movie star who never held any polititcal office whatsoever or ran a business to run the worlds 8th largest economy?

Now people want to recall him. Whos next? Brad Pitt? George Clooney? Also, who in the hell alows their cities to become sanctuary cities that now has allowed 3 million illegals to leach of taxpayers?

Walter Moore is running for Mayor of L.A. and he will end its sancutuary policies but Angelenos will probably vote in mecha man again and complain like the rest of Californians do.

You are responsible for your own problems California.

[Robert T. Green]

Does anyone remember when W. made a speech in 2000 saying that it was California's fault that Enron and others were charging astronomical prices for 'delivering' electricity? Where is that footage now that we have sold our souls to the money whores? No one wants to admit that this ponsi scheme was responsible for our ballooning debt because businesses have a vested intrests in destroying democracy so that they become the defacto government. Debt is the new slavery.

[Chris]

Jim in Pasadena and Peter are absolutely right. Its amazing to me that a policeman straight out of the academy can make the same amount of money as an engineer with a college degree and 2 or 3 years of experience. Yet that engineer has no pension, no overtime and has to contribute a nice portion of his paycheck to a crappy HMO. Oh yeah, cops, fireman & prison guards don't contribute social security (you know that thing that isn't gonna be there when we need it)

As for the illegals, we have the highest tax rate and had the highest property values. Property taxes go straight to education and illegals pay that through rent. Every time an illegal pays for gas or buys something or registers a car they contribute taxes. I'm all for kicking them out but other states have illegals and no income tax (Texas and Nevada) so how is it that we're in this mess?

[martscan]

I have no idea how to fix the state's budget problems.

[Kara Lane]

PENSION REFORM! PENSION REFORM! PENSION REFORM!

How is it justifiable that ALL government workers are allowed much earlier
retirements, with far more generous benefits, than private sector employees?
And do not believe their claim that their salaries are lower than most Americans, in fact, they are paid higher.

[Da Maverick]

General Obligation bonds are passed by voters, not "illegals" who don't vote and much less, know how to read a voter pamphlet. This budget mess is as much the fault of the average Californian resident who thought "bonds" were some kind of magical money pot that never had to be repaid. California residents and voters need to shoulder the blame for the shallow people they send to Sacramento as much as the stupid propositions they pass (Prop 8, 2/3rds budget majority, Jessica's Law) that make governing in CA so hard. Also, this was not Karen Bass' fault, this was mostly Fabian Nunez' fault, the prev. Assm speaker, who through his bending over for Unions and ATT put us in the dire predicament we are in now. This man has ambitions of being Mayor of L.A too, I hope we don't do that.

[vinny]

It's not only Prop 13, but it was about spending. California Government has double its spending in the last 5 years from 75 Billion when Arnold stepped to office until now 141 Billion. I don't think California had double in population.

At this moment in time we are the highest tax state (gas, sale, state) so taxing more won't be a solution. We need fiscal responsibility to the state. Just like all the citizen of California, we cut back our spending when we don’t have enough. We don’t go to our BOSS and ask for more money.

[Jim Fawcett]

Where's Gray Davis when you need him?

[Chunkdog]

California has the highest gas, sales and state income taxes, yet is having financial problems. This isn't rocket science, folks, the state spends too much--in an average person's lingo--living beyond its means.

And, I agree, the state legislators, elected officials who have caused this problem should be the ones taking a pay cut, both to their salaries and their per diem, perks, office staffs.

Takes lots of huevos to pick on the old, disabled and children, yet keep your own lifestyle intact.

[ER]

The California govt. employee unions' (ie. police, fire, prison guards,teachers, etc.) headlock on our politicians in Sacramento needs to be broken once and for all if we ever expect to have a balanced budget here in California.

[Jim Fawcett]

First, I'm neutral on all this because I too have no idea the best way to restore California to the black. However, I would like to address some misconceptions by several of the commenters. Yes, Arnold is doing a lousy job, but he is no way illiterate nor uneducated. He did graduate from college and was smart enough to make a ton of money in real estate. Police and firemen's salary are too high in only some areas of the state. And for those of you who think California has high taxes, try living in New York or Maryland where the minimum state tax for people who can't itemize is 7% right off the top. And while I get angry about illegal aliens, a study a few years ago by several economist showed that from an economic standpoint, they are a net benefit to the state. Taxes, for example, are taken out of their pay, but they don't file for refunds. Social security is deducted, but they never collect any. Medicare is also deducted. Public employes who don't have to pay social security must pay the current social security rate into a fund where the employer matches it. Actuarially, social security is a much better deal as the return is at least 7:1 and probably more depending on how long one lives. And ever since I took a consumer economics course in high school some 55 years ago, the teacher told us that social security wouldn't buy lunch in a few years because the U.S. was so in debt. I've heard this for 55 years and I'm very happily collecting it and will till I check out.

[ARg]

Like illegal immigrants were defaulting on houses they couldn't afford??

Yeah right.

It's all a result of our stupidity (white asian latino purple beige whatever), putting all these stupid ballot initiatives asking for this or that, and then electing douchebags into office who would split a penny in two if they thought they could keep the other half.

We weren't paying attention. And since California is also the world's largest economy, I guess that means we are right up there with Moldova when it comes to solvency.

[Frustrated in SM]

Comments focused primarily on the (current) top guy and/or vague notions of supremacy of Left or Right policies, indicate how ignorant we all are about the cause of the situation. We should be talking specifics, what spending has increased? By what percentage? Dollar amounts? What has caused the increases? Why are we so dependent on income and sales tax? Is this due to Prop 13?

Most people in favor of Prop 13 don't want to talk about the dramatic tax burden inequity it creates on the backs of a generation that has already had to contend with higher mortgages and college tuitions.

[Rob]

We don't need tax hikes, we need the leftist legislature to STOP SPENDING! Just like the rest of us, when we can't afford something, you don't buy it. We can't continue to have one of the largest state payrolls and paying for social programs that are pure luxuries (yes, illegal immigrants cost us $5b per year). We can't be all things to all people.

[jk]

yes, there is too much govt "warm bodies". no one ever tries to judge efficiency or how to do more with less.
still, it was the public which was fooled by his idiotic "car license relief" gimmick. Meanwhile, for the next 20 years (?) we still pay those enron crooks with that "dwr" generation charge on your electric bill - that was the "negotiated settlement" that locked electricity users into those outrageous rates that the texas republican crooks engineered.
all in all, I won't cry a tear to see govenator go.

[BRL]

Money in this state is being spent for something, but it's not the schools, infrastructure, or health care. Where does it go? Funds spent by any state employee for anything must be audited, with the audits available to the general public. Transparency would work miracles.

Prop 13 must also be modified to include reasonable taxes on businesses. Prop 13 was not all about saving homeowners but about enriching corporations and business.

[MrCori]

Hey Jim, I can graduate from college with a sociology degree but that dosen't qualify me for Governor but I would be a college graduate. Drug dealers make alot of money to but that doesn't mean they should be Governor. Secondly, I don't know what stats you've been fed, but illegals take FAR more from California than they contribute! This was just written about by Skelton yesterday in the L.A. Times!

Illegals are not the sole problem of California's budget problems, but they are an uneccessary part of it.
And again, what would posses ANYBODY in California to vote Arnold in as Governor once let alone twice! His qualifications were what?

Like I said, California's problems were brought on by the very people that now complain about it, THE CITIZENS AND THEIR STUPID CHOICES IN PUBLIC OFFICIALS AND THEIR PROUD TO BE LIBERAL BS!