State’s Financial Outlook Upgraded by the S&P

The S&P (Standard & Poor's) announced this week that the state of California’s financial outlook has improved, as the state has officially shifted from “stable” to “positive.” This means that a credit-rating upgrade could occur if pragmatic fiscal solutions are enacted. California currently has one of the lowest credit ratings of any state. An analyst from the ratings agency noted that the positive outlook was in part due to the fact the state “corrected a significant portion of its budget imbalance.”

An analyst also stated, “We are going on a limb here and saying that there’s at least a 1 in 3 chance that within the next two years we’ll raise the state’s bond rating.”

In response to the improved outlook, Governor Brown commented the following: “The fact that California’s ratings outlook has shifted from negative to positive in less than a year is a powerful vote of confidence in our state. Let’s keep the momentum going.”

While the S&P news may be a positive announcement, the LA Times points out that there is still cause for concern, as “Hampering the state’s financial outlook is the continuing disconnect between budget predictions and cash flow. Even as the deficit has shrunk, the state still spends more and collects less money than it expects to.”

Notably, the rating agency has not given California a positive outlook since June 2007. More on the state’s outlook can be seen here.