California Debt Downgrade Puts Credit Below Louisiana

[Purveyor]

Feb. 9 (Bloomberg) -- First, Superintendent Don Iglesias canceled plans to update science laboratories in public schools in San Jose, the center of the U.S. technology industry. Now he’s preparing to fire hundreds of teachers.

The 31,000-student district is a victim of the California budget crisis, an annual event in the most populous state and the biggest ever with a $42 billion shortfall expected over the next 17 months. “We’ve been pushed to the wall,” Iglesias said.

Governor Arnold Schwarzenegger, a Republican, and the Democratic-controlled legislature have been deadlocked for four months on a deficit reduction plan. Revenue is so depleted that Controller John Chiang delayed $1.9 billion in tax refunds and Schwarzenegger ordered state employees to take two days of unpaid leave every month. The governor and lawmakers met yesterday without announcing a plan.

Citing politicians’ failure to act, Standard & Poor’s on Feb. 2 cut $46 billion of California’s full-faith-and-credit debt to A from A+, making the largest tax-exempt borrower the lowest rated state, behind Louisiana. California’s 10-year general obligation bonds are already paying a record 1.23 percentage points in yield above benchmark municipal debt, according to Bloomberg indexes.

California 5 percent bonds due in 2023 traded at a price to yield 4.72 percent last week, almost a half-percentage point more than the 4.27 percent when they were sold in October 2007, according to Municipal Securities Rulemaking Board trade data.

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BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601103&sid=aJK3gM2Mf4t0&refer=us

[WI_DEM]

1. Great job, Arnold! Maybe you should be recalled.