California’s credit rating could get even worse

July 17, 2012

By Joseph Perkins

California’s rock-bottom credit rating has been attributed in some quarters to the state’s most recent economic downturn, from which Gov. Jerry Brown said this past spring, “We are still recovering.”

But a new study by the Pew Center on the States suggests that California’s abysmal credit rating is neither a recent development, nor attributable to the recent recession. In fact, California has been the least creditworthy of the 50 states over the past 11 years, according to Pew.

That included periods during which the state economy was mired in recession, from 2007 to 2009; and, before that 2000 to 2002 (following the dot-com bust). But it also included the state’s economic boom between 2003 and 2006 (fueled by the housing bubble).

And it included the administrations of three governors: Gov. Gray Davis, in office 1999 to 2003, who was recalled largely because of his fiscal irresponsibility. Gov. Arnold Schwarzenegger, 2003-2011, who was elected on promises that he would “terminate” the state’s fiscal problems, but only made them worse with excessive spending increases and tax hikes; and Brown, 2011-12, who is doing an Arnold imitation.

The business cycle affects all 50 states. But, explained Pew’s Steve Fehr, “The states with the lowest grades,” like California, “typically have trouble keeping their spending in line with their tax revenues.”

That’s why California’s credit is currently rated A- by Standard & Poor’s, the lowest among the states.

That means the Golden State’s debt is rated closer to triple-B, which amounts to junk-bond status –than it is close to triple-A, S&P’s highest rating, which, according to the credit rating agency, indicates an “extremely strong capacity to meet financial commitments.”

Back in February, state officials congratulated themselves after S&P upgraded its financial outlook for California from “stable” to “positive,” holding open the possibility that the state’s credit rating might rise from A- to A (which would still rank lowest among the states).

“The fact that California’s ratings outlook has shifted from negative to positive in less than a year in a powerful vote of confidence in our state,” said Brown in a statement.

S&P warning

As it turned out, the self-congratulations were premature. In March, S&P issued a report noting the unwillingness of Brown and the Legislature to take the steps necessary to eliminate the state government’s structural deficit.

“In our view,” the report stated, “a waning appetite for more budget austerity among lawmakers could present a hurdle to timely and realistic budget solutions, which could interfere with the state’s credit quality to strengthen.”

S&P’s March report was followed by a report this past May. It found: not only might its upgrade of California’s financial outlook be short lived, the state’s credit rating could be downgraded as well.

“We could change the outlook to negative or lower the rating,” the credit-rating agency warned, “if we believe the state’s credit quality weakens through the budget process.

Last month, Brown and the Democratic-controlled Legislature enacted a budget for fiscal year 2012-13, which began on July 1, that does not have the spending cuts S&P was looking for, based on its March report, and that will not be “balanced” unless California voters approve Proposition 30, the governor’s $8.5 billion tax hike.

It’s doubtful S&P will look favorably upon this year’s budgetary legerdemain in Sacramento. The question is whether the credit rating agency will downgrade California debt even lower than it already is.

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  1. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 09:15

    Poodle hates the truth—- pension envy baby.

    True- the California Public Employees’ Retirement System earned 1 percent in the past fiscal year as slumping global stock prices dragged down the largest U.S. pension.

    But– private equity gained 5.4 percent. Calpers’ bonds rose about 13 percent and its real estate holdings climbed 16 percent. Calpers, as the fund is known, ended fiscal 2012 with $233 billion in assets, according to a statement today.

    “Inevitably, a 1 percent return will be noted by some as significantly below our target return of 7.5 percent and questions will be raised as to whether that 7.5 percent is realistic,” the fund’s chief investment officer, Joseph Dear, said in remarks to reporters. “One percent is below where we would like it to be but it is well within the range of returns for the kind of portfolio we have.”

    21% Return
    The fund earned almost 21 percent in fiscal 2011, its best result in 14 years.

    All Trolls please spin wildly on the above til I get back out here to make fun of you… Ted

    Reply this comment
  2. Donkey
    Donkey 17 July, 2012, 09:31

    California is being run just like the Federal government. The only difference is that the California RAGWUS members disregard all logic and reason.

    Ted Steals, $233 billion is not very much money when you owe the $trillions that the RAGWUS has promised itself. You just refuse to live in reality Ted. 😉

    Reply this comment
  3. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 09:37

    1%%%%%%%%%%%%%%%%%%% baby!!!!!!!!

    Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 09:37

    Teddy is a sage..show some respec

    Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 09:38

    Respect.

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 09:38

    21% Return
    The fund earned almost 21 percent in fiscal 2011, its best result in 14 years.
    ============
    And CalTURDS earned a NEGATIVE 37% in 2007!!!!!!!!!!!

    1%%%%%%%%%%%%%%%%%%% BAM!!!!!!!!!!!

    Reply this comment
  7. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 09:39

    You just refuse to live in reality Ted.
    ===
    Donk, it is hard for Teddy to live anywhere with me living inside his tiny brain 🙂

    Reply this comment
  8. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 09:45

    The credit rating is seriosu business tho, and I doubt if ANY Wall St lenders will lend money-even short term-uder 25% to CA, I know I wouldn’t.

    Reply this comment
  9. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 09:48

    Mr U Haul (me in another account?)-

    LOL— This is my best time EVER for spinning trolls!! I chummed the water at 9:15 and I had a whole school of trolls biting and spinning in 16 minutes!!!

    Oh my it’s going to be another good day !!

    Off to the gym and breakfast !!

    God Bless ya Pack and Ship !

    Reply this comment
  10. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 10:03

    Would you give whiskey to an impaired bar patron?

    Depends on the definition of “impaired”.

    Reply this comment
  11. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 10:19

    I wonder what would happen if ya chum some tax cut replicas outside their deep doomsday bunker…..probably get em all up to the surface!

    Reply this comment
  12. Rex The Wonder Dog!
    Rex The Wonder Dog! 17 July, 2012, 10:52

    Would you give whiskey to an impaired bar patron?

    Depends on the definition of “impaired”.
    ==============
    Impaired = 1%%%%%%%%%%%%%%%%%%%%%%%%%%% Baby!

    Reply this comment
  13. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 11:16

    U Haul– Stay away from the bunker— they’re riled up down there today !!!!!

    They must have run out of tin foil hats !

    Reply this comment
  14. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 14:07

    Back from the gym ! My God I am buff—- What’s up trolls???

    Reply this comment
  15. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 15:15

    Teddy…..I think their bunker got hit by those big fat worms from the movie TREMORS!

    Heard all they had for protection were a couple 1955 “over and unders” they picked at the Quartzite, Arizona winter meet up and a fake rusty bowie knife from The Alamo gift shop. A pity!

    Reply this comment
  16. us citizen
    us citizen 17 July, 2012, 15:31

    Part of this states problem is ILLEGALS. And no one seems to ever want to admit that we have been invaded by them with their hands out. They arent sneaking across the border for fun. They want goodies and they want them for free which they get here. And all us stupid tax payers keep voting in the crap of a govt we have. Cant hurt their little feelings by making them go home where they belong now, can we? This disgusts me to no end. You cant even go anywhere around here anymore without thinking you accidently stepped across the border by mistake and cant find your way back. Gotta have everything in 100 different languages, your school is over crowded with non english speaking students, you get to wait at the ER for them because they dont have doctors, heaven forbid one hits you on the freeway, speaking of freeways there should would be a lot less on them if they were gone, but oh wait, you get to share your water, electricity and gas with them too……..so enjoy that black out when there isnt enough to go around. Stupid damn politicians ought to all be shot.

    Reply this comment
  17. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 15:37

    This State has so many problems CWD is going to burn us all out!

    Reply this comment
  18. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 15:59

    1%%%%%%%%%%% 😉

    Reply this comment
  19. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 16:06

    The worms ate the Poodle ™ ??? Say it aint so Mr. Haul !!

    Reply this comment
  20. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 16:21

    Teddy….it will be a long nite outside Adelanto….hope the poodle makes it!

    Reply this comment
  21. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 18:14

    LOL Adelanto !!!!!!!!!!!!!!!!!!!! U Haul, on behalf of all of us out here…..thank you!

    Reply this comment
  22. Rex The Wonder Dog!
    Rex The Wonder Dog! 17 July, 2012, 21:24

    Bel Air baby!!!!!!!!!!!!!!!!

    1%%%%%%%%%%%%%%% 🙂

    Reply this comment
  23. Rex The Wonder Dog!
    Rex The Wonder Dog! 17 July, 2012, 21:25

    Adelento is nice tho, high country!

    Reply this comment
  24. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 21:47

    I knew the loon bunker was in the meth desert………and the poor poodle admits it !

    Reply this comment
  25. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 22:37

    1%%%%%%%%%%%%%% Teddy DIED when the sky fell on him!

    Man, geez I HATE being right all the time 😉

    Reply this comment
  26. Rex the Wonder Dog!
    Rex the Wonder Dog! 17 July, 2012, 22:37

    My summer home is in [email protected]!!!

    Reply this comment
  27. Ted Steele, The Decider
    Ted Steele, The Decider 17 July, 2012, 22:44

    LOL— Ya mean your summer trailer!

    Ouch!

    Reply this comment
  28. Ulysses Uhaul
    Ulysses Uhaul 17 July, 2012, 23:08

    Those fat tremor worms just broke the bunker perimeter…. it’s gonna get ugly!

    Reply this comment
  29. Rex The Wonder Dog!
    Rex The Wonder Dog! 18 July, 2012, 21:30

    1%%%%%%%%%%%%%%%%%%%%%%%%%% Baby!! 😉

    Reply this comment
  30. Ted Steele, Janitor
    Ted Steele, Janitor 18 July, 2012, 21:43

    What about last years 20% baaaaaaaaaaaaaaby?

    What about 7.75 over 20 years?

    What about 234.4 billion baaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaby? LOL LOL

    …and….still waiting for your answer to my question from last week??

    Or can’t you?

    Hmmmmmmmm mmmmmmm lol

    Reply this comment
  31. Ulysses Uhaul
    Ulysses Uhaul 18 July, 2012, 22:58

    Teddy…. the tremor worms musta missed their bunker. Maybe there just sittin real quiet in their boxers and sweatin it out!

    Reply this comment
  32. Rex The Wonder Dog!
    Rex The Wonder Dog! 19 July, 2012, 00:15

    Last 5 years CalTURDS= 0.10%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

    0.10%%%%%%%%%%%%%%%%%%%%%%%%%%%% Baby!

    Reply this comment

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