California's Credit Rating Raised After Prop. 2 Passes
California’s credit rating was raised by Standard & Poor’s one day after voters in the most indebted U.S. state agreed to bolster a rainy-day fund for fiscal emergencies.
S&P boosted its rating one step to A+, fifth-ranked, the highest since February 2009. Only New Jersey and Illinois have lower ratings.
“This is the fourth upgrade for California by a rating agency in the past two years and it rewards the state for the immense strides it has taken toward fiscal discipline and budget stability since the Great Recession,” Treasurer Bill Lockyer said yesterday in a statement.
Credit-rating companies have criticized California for its failure to set aside money when the economy is booming and for relying on volatile capital-gains taxes tied to the performance of the stock market, to finance the general fund, which pays for most core operations.
Proposition 2, championed by Democratic Governor Jerry Brown, sets aside 1.5 percent of general-fund revenue each year into a rainy-day fund, as well as capital-gains taxes that exceed 8 percent of the general fund.