SAN FRANCISCO - Standard & Poor's lowered California's short-term credit rating to SP-2 from SP-1 and placed $53.8 billion of long-term debt on negative Creditwatch after recent reports showed a "significant deterioration" in the state's cash position.

"California is pressured by recent sharp declines in revenue as the result of an economic slowdown," said analyst David Hitchcock. "The state should have sufficient resources to solve its projected cash shortfalls if the Legislature can reach the necessary two-thirds supermajority required for budget adjustment."

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