California’s slowdown in state revenues could result in politically difficult budget adjustments to maintain positive budgetary reserves, with a possible return to a deficit fund balance position on the horizon, according to a report Standard & Poor’s released Tuesday. The report was part of an annual review of state governments around the country, and its content reflects the rationale the rating agency used Nov. 20 when it revised its outlook on California’s A-plus credit rating to stable from positive. “The state budgeted a small 1% net revenue operating surplus in 2008, but slow revenue growth and unexpected expenses already incurred by the state could produce a deficit,” the report said.

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