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S&P: Prop 30 Outcome Good for California's Credit Rating

Nov 7, 2012

The ratings agency Standard and Poor’s is calling Proposition 30’s passage “favorable” for California’s struggling credit rating.

“It keeps the state’s prospects for a credit rating upgrade alive going forward. Had the measure gone down, I think it could have added pressure in the other direction,” says S&P analyst Gabe Petek.

California’s A-minus rating is the lowest of the 50 states. But Petek says the state's credit outlook is positive, meaning the state is moving in the right direction. And Prop 30 could give the state some “breathing space” to move toward a higher rating.

“It opens the door for the possibility that the lawmakers could consider more substantive fiscal reforms with long-term benefits but in a less crisis-like environment,” says Petek.

Petek warns Prop 30 does have a downside: It will increase the volatility of California revenues, since the state will rely even more on income taxes paid by the wealthy.