Downgrading Ahnold

[Michael Pollak <mpollak@xxxxxxxxx>]

[He can rant all he wants about a referendum next November (now that he's
missed the deadline for March).  His money runs out in June]

Financial Times; Dec 11, 2003

Moody's downgrade deepens Californian budgetary woes

By Christopher Parkes in Los Angeles

Moody's Investors Service, a top credit rating agency, this week
downgraded almost $40bn (E32.7bn, £22.9bn)  worth of Californian bonds by
a notch, raising the pressure for a solution to the state's budget woes.

The downgrade, from A3 to Baa1, marked Moody's third devaluation of
California's debt this year. It came on Tuesday, just as tentative talks
restarted on the governor's plan for borrowing up to $15bn, coupled with a
strict spending cap.

Moody's new rating is one notch above that of Standard & Poor's and two
levels below the Fitch agency's.

The recent move by Arnold Schwarzenegger, California's Republican
governor, to cut vehicle licence fees had raised the general fund's
expected cash shortfall through to June 2005 from $22bn to $29.5bn,
Moody's noted.

The ratings agency also said California's credit outlook remained
negative, based on risks that the state might have to refinance $14bn of
short-term notes and warrants that mature next June.  That is when
California will run out of cash if nothing is done, according to state
officials.

'"Given this, we expect the state will remain reliant on significant
financial assistance from the capital markets," Moody's said.

The agency called the recent move to raise, not lower, the general fund's
cash consumption, and the state's political disagreements, "not
encouraging".

Moody's rating change came one day after the state treasury delayed issue
of $1.5bn in general obligation bonds, reflected growing uncertainty over
the fate of Mr Schwarzenegger's "California Recovery Plan". Although
accord on one key element - some $15bn in long-term borrowing - appeared
close last weekend, talks in the legislature broke down over the
governor's insistence on a spending cap.

"Today's action by Moody's is an ominous sign that California is headed
for a financial meltdown unless responsible actions are taken to balance
our budget," Phil Angelides, state treasurer, said.

"So far, the governor is going the wrong way. As Moody's indicated, he has
deepened our budget deficit. And, the governor's current proposals - a
massive borrowing plan and a spending cap - merely create the illusion of
a solution."