State of California

State of California

State of California

Mon 06 Mar, 2023 - 2:38 PM ET

California's 'AA' Issuer Default Rating (IDR) and GO rating incorporate the state's large and diverse economy, which supports strong, albeit cyclical, revenue growth prospects, a solid ability to manage expenses through the economic cycle and moderate long-term liabilities. Strong fiscal management, institutionalized across administrations and demonstrated through build-up of the budgetary stabilization account and elimination of past budgetary borrowing, allows the state to better withstand economic and revenue cyclicalit

https://www.thecentersquare.com/california/california-bonds-receive-aa-rating-from-fitch/article_9ffbb2be-9e52-11ec-8823-372519221e34.html

Top credit rating agency Fitch has assigned California a “AA” rating for its $2.2 billion in general obligation bonds, a reasonably high grade that analysts say considers the state’s diverse economy that supports “strong, albeit cyclical, revenue growth prospects.”

The state’s general obligation (GO) bonds, which are a type of municipal bond, are used to finance or refinance voter-approved projects. Unlike revenue bonds, general obligation bonds pledge that the state will use all resources available to repay bond holders, including tax revenues, according to Investopedia.

Similar to an individual credit score, the better the bond credit rating, the cheaper the borrowing cost, according to the California State Treasurer’s Office.

Fitch’s latest ranking considered $1.4 billion in GO bonds used for various purposes, as well as $800 million various purpose GO refunding bonds. According to analysts, the state has a “moderate level of long-term liabilities” and “strong fiscal management” that allows the state to “withstand economic and revenue cyclicality.”

 

 

 

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