Friday, January 15, 2010

California bond rating cut

S&P cut California's bond rating from A to A- this week, and it might go lower:

"If economic or revenue trends substantially falter, we could lower the state rating during the next six to 12 months," S&P said after cutting the rating on $63.9 billion of California's general obligation debt one notch to A- from A.

The new level is four notches above "junk" status, a level at which many investors refuse to buy debt.

Since CA is still papering over its shortfalls with loans and accounting tricks, it means that all that borrowing is now going to cost a lot more.

A simple solution would be to spend less than the state collects in taxes, but what do I know.

1 comment:

self certified genius said...

Puzzles me why California has a rating above Z. I would compare it to the Titanic, except the Titanic's captain had a clue.