Fitch Warns California

Fitch Ratings said in a report this week that California’s financial future remains clouded despite recent budget progress.

“In spite of tangible fiscal improvement, numerous fiscal challenges remain,” Fitch analyst Douglas Offerman said in a report Tuesday. “The remaining $9.6 billion budget gap is substantial, and achieving agreement on a final budget-balancing package is likely to be contentious and protracted.”

Offerman also noted that the uncertainty surrounding the passage of the budget also affects the state’s near-term cash flows, which will erode in the early part of the new fiscal year without a balanced budget compromise.

Additionally, the rating agency said many of the institutional and political factors remain unchanged that have repeatedly hampered the state’s ability to effectively fix economic and fiscal problems.

Without change, the state will unlikely be able to effectively manage the benefits of the economic recovery, Fitch said.

In March, the California Legislature adopted $13.4 billion in budget reductions and Gov. Jerry Brown has so far signed $11 billion worth into law.

His budget solution hinges on a special election to give voters the chance to approve an extension of temporary tax measures. Brown has yet to get the needed support from Republicans for his plan.

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