SACRAMENTO — California's bond rating was downgraded below that of every other state Tuesday by a major Wall Street rating agency, as lawmakers trying to resolve the state's financial problems faced growing resistance from powerful interest groups.
Citing the state's prolonged budget impasse and its nearly empty treasury, Standard & Poor's lowered its rating on $46 billion in general obligation bonds, which investors usually consider one of the safest investments because they are backed by taxpayers.
By reducing California's bonds from an "A-plus" to an "A" rating, the agency declared that it now considers even the debt of Louisiana -- whose credit had been ranked equally with California's -- a more trustworthy investment. Most states are rated "AA" or "AAA."
"Our rating recognizes our view of the lack of political progress around the budget negotiations that we believe is serving to exacerbate the state's current and projected cash position," Standard & Poor's wrote in its report.
Even as the agency chastised the state, Gov. Arnold Schwarzenegger and legislative leaders intensified their negotiations to close the state's projected $42-billion budget gap. After a 90-minute afternoon meeting, Senate President Pro Tem Darrell Steinberg (D-Sacramento) emerged from the governor's office and told reporters that "there are a few remaining issues."
Senate minority leader Dave Cogdill (R-Modesto) cautioned that "we're still in discussions" and "it's too early to tell" when a deal might be reached.
With buzz of a potential agreement growing in recent days, activists were taking aim at rank-and-file legislators, threatening to jeopardize the political careers of any who supported a deal the activists opposed.
On Monday, the California Labor Federation summoned Democratic legislators to the union's office in Sacramento. There, they reiterated organized labor's opposition to Republican demands for changes in some workplace rules governing when employees take breaks and when they are paid overtime. About 30 lawmakers attended the meeting, said union officials and legislators.
"It was an important meeting for us to have," said Assemblyman Alberto Torrico (D-Newark). "There were issues that labor was concerned about." He called the proposed changes "a nonstarter."
