As California's leaders continue to fiddle in Sacramento, the state's financial house continues to burn. Today's Los Angeles Times had a front-page article about the bond rating agency Standard & Poors reducing California's bond rating so that it is now ranked last among the 50 states:
Citing the state's prolonged budget impasse and its nearly empty treasury, Standard & Poor's lowered its rating on $46 billion in general obligation bonds, which investors usually consider one of the safest investments because they are backed by taxpayers.
By reducing California's bonds from an "A-plus" to an "A" rating, the agency declared that it now considers even the debt of Louisiana -- whose credit had been ranked equally with California's -- a more trustworthy investment. Most states are rated "AA" or "AAA."
"Our rating recognizes our view of the lack of political progress around the budget negotiations that we believe is serving to exacerbate the state's current and projected cash position," Standard & Poor's wrote in its report.
In other state budget news, the "Big Five" - Governor Arnold Schwarzenegger, State Assembly Speaker Karen Bass, State Senate President Pro Tempore Darrell Steinberg, Assembly Minority Leader Michael Villines, and Senate Minority Leader Dave Cogdill - have been meeting in secret trying to reach a budget accord that will patch (the operative word in any California state budget negotiation) the state's projected $42 billion deficit.
The Sacramento Bee's Kevin Yamamura has an article exploring the reasons for the secret budget meetings in which he writes:
Gov. Arnold Schwarzenegger and the four legislative leaders have continued their negotiations behind closed doors for weeks, bypassing open legislative committees and offering the outside world few details as a precondition of their talks.
They fear special interests will mobilize on every proposal they hear about, ramp up pressure on lawmakers and prevent any possibility of reaching a deal that could secure enough votes.
Those special interests include, on the left: labor unions, environmental organizations, and education lobbyists; and, on the right: anti-tax groups and business group lobbyists.
The Sacramento Bee also reports that the California State Auditor has placed the budget on its lists of high risk issues:
"Based on the current fiscal crisis and a history of ongoing deficits, the Bureau of State Audits has added the state's budget condition to its list of high risk issues," the report says in an introduction. "The record breaking delays in passing the fiscal year 2008-09 budget, the need for subsequent special sessions, and the multibillion-dollar budget gap lawmakers are attempting to close highlight the potential for the state's budget process and condition to add significant roadblocks to the tasks of managing and improving state and local government."
Among other things, the report points out that over the last two decades, the state has faced deficits more often than surpluses and the former have outweighed the latter, $146 billion to $30 billion. It also notes that in closing deficits, governors and legislators have often used expedient, short-term methods that "only deferred the problem into the future."
All these issues, of course, have their local impacts. Money the state has promised but cannot deliver results in local projects being scaled back, as we've seen with Claremont's Padua Ave. Park, which is going forward without $850,000 in state grant money that was supposed to go towards native plant landscaping, walking paths, and low-water irrigation. Claremont, facing its own $3.5 million deficit over the next year-and-a-half, is in no position to make up the project's sudden shortfall.
So, sustainability, you take one one for the team on this one.
Posts
