More good municipal credit news! The “drama queen” of municipal finance, the state of California, has had its General Obligation credit ratings revised to a positive outlook from stable by S&P (long-term ratings of A-). Expenditure cuts and better budget alignment, going forward, has S&P poised to upgrade the credit rating on the state. The state’s revenue growth has been flat over the last year, as the state has yet to get its economy rolling.
What makes this a notable event is that it provides proof that states are making the tough policy and spending decisions to support their fiscal responsibilities. If the state with some of the highest “political barriers” to making fiscal cuts can do it, other municipalities can, as well. It is this theme that has kept municipal defaults to a minimum, and municipal bonds the SWAN (Sleep Well At Night) investments that they are.