Fitch Upgrades Calif.’s Bond Rating to ‘A’ Based on Brown’s Budget

Fitch Ratings has raised California's bond rating from an "A-" to an "A" based in part on Gov. Jerry Brown's (D) "structurally sound" budget, the AP/Sacramento Bee reports.

The state has held an "A-" grade from Fitch since 2010 (Williams, AP/Sacramento Bee, 8/5).

Background on Budget Plan

In June, Gov. Jerry Brown (D) signed into law a FY 2013-2014 spending plan.

The approved budget calls for:

• $206 million to improve mental health care services, including $142 million in one-time general fund money in the coming fiscal year;
• $51 million in non-general fund money in the coming fiscal year and about $150 million the following fiscal year to boost grants for CalWORKS, California's welfare-to-work program; and
• $16.9 million in general fund money in the coming fiscal year and $77 million the following fiscal year to help partially restore Denti-Cal benefits for adults.

Denti-Cal is the Medi-Cal dental program.

The plan also includes an 8% cut to In-Home Supportive Services providers and an additional $206 million to develop 25 mobile crisis support teams and provide 2,000 or more beds in local treatment centers for individuals with mental health problems (California Healthline, 7/31).

The plan uses a more conservative economic forecast touted by Brown in the spring, despite that Democrats had sought about $2 billion more in spending on state services and programs (California Healthline, 6/28).

Details of Rating Change

Fitch said it increased the rating because California has made progress on:

• Creating timely and sound budgets;
• Spending restraint; and
• Sizable reductions to debt (AP/Sacramento Bee, 8/5).