S&P Improves California Bond Outlook To Positive

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California State Capitol in Sacramento (Justin Sullivan/Getty Images)

California State Capitol in Sacramento (Justin Sullivan/Getty Images)

SACRAMENTO (CBS / AP) — Standard & Poor’s on Tuesday improved California’s bond outlook from stable to positive, a sign the state might be poised for a credit-rating upgrade if the Legislature continues to make spending cuts and tax revenue meets projections.

Although California still faces a $9.2 billion deficit, the credit rating agency said the state has corrected a significant portion of its budget imbalance.

KCBS’ Doug Sovern Reports:

“We are revising the outlook because, barring any other credit deterioration, (we) think the state is poised for credit improvement—and potentially a higher rating—pending its ability to better align its cash performance and budget assumptions,” S&P analyst Gabriel Petek said in a statement.

The agency’s report says a higher rating is contingent on sufficiently credible solutions to the state’s $9.2 billion deficit. That would include automatic spending cuts that are not subject to changes after the November election, if voters reject Gov. Jerry Brown’s tax hikes.

Brown has proposed a mix of cuts and temporary tax hikes but Democrats who control the Legislature are opposed to more cuts.

If the state can reach a balanced budget by the summer, California’s low credit rating might be turning a corner.

The last time the rating agency gave California a positive outlook was June 2007, when it had an A-plus rating. It now has a rating of A-minus. California’s outlook improved from negative to stable last July after the last budget was passed.

Revenues, however, remain a concern. Last week, the state controller’s office released its latest monthly report showing tax collections came in $528 million below the January projections in the governor’s proposed budget.

“Our rating is still near the bottom when compared to other states,” Senate Republican Leader Bob Huff, R-Diamond Bar, said in a statement. “While this is movement in the right direction, Californians should delay celebration until we’re closer to the top than the bottom.”

(Copyright 2012 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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