SAN FRANCISCO (Reuters) - California will face continued credit pressure as it will likely face another large mid-year budget gap and a significant deficit next year, a Moody’s Investors Service analyst said in a report released on Tuesday.
Vice President-Senior Analyst Emily Raimes in her report applauded California at last enacting a state budget earlier this month for its current fiscal year — which began in July — but said that “The bad news is that the budget relies heavily on one-time measures, optimistic revenue assumptions, and the receipt of funds, some of which may not materialize.
“As a result, it is likely that the state will face a large mid-year budgetary shortfall later this year and that the budget gap for next year will be significant, both of which will place continued credit pressure on the state,” Raimes said.
She noted there is no guarantee the U.S. government will provide the $5.4 billion to California that is included in the state budget, which closed a $19.1 billion shortfall. She also said the spending plan’s revenue assumptions may be too optimistic.
Moody’s rates California’s general obligation debt ‘A1.’
Reporting by Jim Christie; Editing by Jan Paschal