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As Standard & Poor's urged lawmakers Tuesday to pursue "credible" budget solutions to bridge the state's $16 billion deficit, the ratings agency did not approve of Senate leader Darrell Steinberg's idea to forego a reserve this year.

In the report, S&P suggested it could lower the state's ratings outlook or even impose a downgrade if lawmakers and Gov. Jerry Brown don't pursue real solutions that bolster the state's cash situation this summer. The state still has a "positive" outlook but an A- credit rating, which rates lowest in the nation.

Brown built a $1.05 billion reserve into his $91.4 billion general fund budget for 2012-13. Steinberg said yesterday that one idea was to use that money instead on public programs.

"Look at the size of the reserve," Steinberg said. "You build up a reserve during good times and during the most difficult times, you don't want the resources sitting necessarily in the bank, you want to use it on mitigating the impact on people in the economy."

"It's raining," observed Sen. Mark Leno, D-San Francisco, a reference to the reserve nickname of "rainy-day fund."

But S&P said today, "In our view, this reserve level is low but important considering that the potential Facebook initial public offering-related income tax revenue is especially difficult to forecast."



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