The collateral damage from California’s budget crisis now includes three nonprofit regional centers that serve the developmentally disabled, who saw Moody’s Investors Service drop their credit ratings to junk-bond status.
Moody’s late Tuesday downgraded California’s general obligation bond rating to Baa2 from A1, and as part of the same action, issued two-notch downgrades to other related credits.
They include bonds issued for three of the state’s regional centers. The nonprofit agencies operate under a 1965 state law that set up a system in which the regional agencies provide state-funded services for the developmentally disabled.
The three regional centers were dropped to Ba1 from Baa2. They are: the Kern Regional Center, which issued $13 million in revenue bonds this May, using the California Municipal Finance Authority as a conduit; the Inland Regional Center, which issued $77.5 million in bonds in 2007 using the California Statewide Communities Development Authority as conduit; and the San Diego-Imperial Counties Development Service Foundation, which issued $10.75 million in certificates of participation in 2002 using San Diego County as its conduit.
Moody’s had placed the regional centers’ ratings on watchlist in early July, citing their high reliance on state funding, and the likelihood the state would pay them with IOUs.
The ratings remain on negative watch list for downgrade.