SAN FRANCISCO Nov 7 California's credit quality
looks to improve after voters approved a measure on Tuesday that
increases taxes to avoid education spending cuts in the near
term and bolster the state's budget in coming years, Standard &
Poor's Rating Services analysts said in a note on Wednesday.
"The measure does more than temporarily increase operating
revenues and, in our view, is the linchpin to the governor's
broader, multiyear strategy for reversing the state's negative
budget position," the analysts said.
"By providing a temporary but significant boost in tax
revenues and permanently lowering its general fund spending
baseline, we believe Proposition 30 helps alleviate the state's
chronic fiscal strain," the analysts added.
They said improvement in California's credit rating depends
on whether its legislature will be able to enact substantive
fiscal reforms now that it has additional revenue to stabilize
the state's finances. S&P rates California's general obligation
debt 'A-minus' with a positive outlook. The rating is lower than
all other states other than Illinois.