Standard & Poor's has given California its highest rating on short term bonds. The “SP1-plus” rating means the agency believes California should have more than enough money to pay back ten billion dollars in short term notes by the end of June next year.
The state collects the bulk of its revenue later in the fiscal year but expenses come earlier in the year.
S&P analyst Gabriel Petek said the rating doesn’t mean the state has solved its longer term budget problems. This rating addresses only cash flow.
“We put the cash flows through some of our own internal stress tests if you will and the cash flow show that they have a good ability to pay the notes off at the end of the year,” explained Petek.
The S&P analysis shows that, even if voters reject the governor’s tax initiative, and some optimistic assumptions don’t pan out, California can still repay ten billion in loans.
The state begins selling the notes in mid-August.
