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After previously threatening downgrades if Proposition 30 had failed, Moody's Investors Service said Thursday that voter approval of the tax initiative positively impacted the credit ratings of California's K-12 districts and colleges.

Gov. Jerry Brown and state lawmakers enacted a June budget that put education funding at risk this year if voters had rejected the measure. Moody's warned before the election that it would have begun reviewing the most perilously positioned K-12 districts for a credit downgrade if that had come to pass.

"Passage of this proposition is credit positive for the state's K-12 school districts, community college districts and university systems because it averts the state executing a $6 billion, mid-year cut to education funding," Moody's wrote in its Thursday report.

Moody's observed that K-12 funding for the current school year will now remain about the same as last year. The ratings agency embraced Brown's plan to use extra cash to begin reversing delayed payments, which had forced districts to borrow to pay their bills on an annual basis.

The agency said that in the coming years, Proposition 30 revenues "could provide district with more revenues, assuming economic growth and taxable income rise above our current expectations."

Earlier this week, ratings house Standard and Poor's said the initiative's passage was a positive development for the state's credit rating as a whole. Analyst Gabriel Petek said that California could climb out of the ratings basement - its A- remains the nation's worst - if the state uses this period of increased taxes to enact permanent changes that steady the budget system.


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