SACRAMENTO (CBS SF) – California’s financial comeback is due mostly to the state’s lower spending, and not higher revenues, that according to a new report by Standard & Poor’s.
The findings go against popular belief that higher taxes and the improving economy are behind the recovery. “Standard & Poor’s Ratings Services sees California’s improving finances and credit quality as more than just the result of a cyclical upswing. In November 2014, we raised California’s general obligation (GO) debt rating to ‘A+’. The move signaled our belief that the state is positioned for a more enduring period of financial stability.”
An S&P analyst said Governor Jerry Brown and state legislators could see a repeat of past mistakes if they rely on overly optimistic revenue projections, rather than building a cushion and paying down long-term commitments.
The report found that it is not only possible, but likely that a future revenue slump will hit the Golden State, based on the fact that California depends so heavily on taxes from the top 1 percent of income earners.
Brown has been resisting any new spending, despite pressure from fellow Democrats to beef up social services, higher education and other programs.