Chiang: California Rating Boost a Validation

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LOS ANGELES — State Treasurer John Chiang said Fitch Ratings’ upgrade of California to A-plus from A validates the state’s fiscal discipline, while cautioning it to keep spending in check.

The move follows continuing efforts by the treasurer and the Department of Finance to strengthen the state’s creditworthiness, and to highlight the fiscal discipline that helped the state recover from years of severe budgetary and cash flow crises, according to the treasurer’s office.

“This upgrade was not accidental,” Chiang said in a statement Thursday morning. “It was the result of purposeful actions taken since the Great Recession to restore California’s fiscal health. Not only can we not afford to backslide, but we must do more.”

The credit upgrade rewards California for establishing a meaningful rainy day fund, taking the difficult first steps toward remedying unfunded pension liabilities, and, most importantly, not relying on fleeting bull market revenues to justify new permanent spending, he said.

“The upgrade is based on continued improvement in the state's fundamental fiscal position,” Fitch said in announcing the upgrade Wednesday evening. “Institutionalized changes to fiscal operations in recent years, when combined with the ongoing economic and revenue recovery, have enabled the state to materially improve its financial position, enhancing its ability to address future fiscal challenges.”

Chiang added that more work needs to be done as California’s credit ratings still trail 47 other states.

“Fitch's credit analysis emphasizes the need for continued spending restraint and more tough decision-making aimed at making future economic downturns – which are inevitable – more manageable,” said Chiang. “If we seek to build more schools, affordable housing, roads, and other critical infrastructure at lower cost, I believe that we must develop a smart plan to pay for retiree health care costs and reform a tax system that pegs California’s prosperity to the success of Wall Street.”

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