In another blow to California's fragile economy, Wall Street's major bond houses lowered the state's credit rating Friday, giving it one of the worst ratings in the nation.
In making the downgrade, Standard and Poor's Corp., Moody's Investment Service and Fitch Investors all cited the state's reliance on federal immigration funds, ongoing budget troubles and fiscal management decisions.S&P lowered the general obligation bond rating one notch from A+ to A, while Moody's issued a similar one-level downgrade from Aa to A1. Fitch lowered its rating two notches from AA to A.
At S&P, the lowered rating gives California the second worst rank in the United States, just above New York and tied with Louisiana.
"This is a truly grim day for California," said state Treasurer Kathleen Brown, the Democratic gubernatorial candidate.
The combined downgrades could cost California at least $60 million in added interest costs when it goes to the market to sell its general obligation bonds, Brown said.
Of particular concern to S&P and Fitch were the state's decision to rely on across-the-board cuts - the so-called trigger mechanism - if it fails to live within its means.
"These potentially draconian automatic cuts could disrupt state operations," S&P said.
Fitch also said the trigger was an adbication of fiscal responsibility that did not bode well for the state credit outlook.