Since 2009 – when the state had to use IOUs to pay its bills – California bonds have returned an annual 6.3 percent on average, data compiled by Bloomberg show. That’s thanks to the world’s ninth-largest economy rebounding to its strongest since 2008 and to voter-approved tax increases set to take effect in January.
Fitch Ratings and Standard & Poor have graded California at A-, the lowest grade among U.S. states. But both ratings companies have said that the tax plan put in place by Gov. Jerry Brown could boost the state’s credit.
California Treasurer Bill Lockyer told Boomberg he hopes ratings upgrades are in the state’s future.
“Rating agencies typically want to see a multiyear trend and not just a shorter-term one,” he said. “This is year three of more balanced budgeting and more fiscal discipline.”
According to the state’s Legislative Analysis Office, California’s budget is headed for a surplus by 2015. It’s a far cry from 2009, when the state was issuing IOUs to its creditors and its rating fell to BBB, matching its lowest level ever.
