S&P sticks with ‘negative’ outlook for California

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One of the nation’s leading credit-rating agencies continues to hold a “negative” outlook for California, citing the state’s sizable deficit and its leaders’ persistent inability to close that gap.

With budget talks between Gov. Jerry Brown and Republicans still at a standstill, Standard & Poor’s said in a report Monday that “the path forward is unclear” for California, leaving the state at risk of issuing IOUs if the stalemate lasts into the summer.

The firm gave high marks to the state’s economy generally. Its strengths include “a well-educated workforce, a capacity to attract venture capital, and prominence in the growing biotechnology and alternative energy industries,” the report said.

But the agency cited the potential for gridlock in Sacramento -- “a fractured budget negotiation process that currently lacks a clear path to balance or political resolution” -- as the chief rationale for the negative outlook.

-- Shane Goldmacher in Sacramento