Capitol Alert

S&P warns against increased spending in California budget

Gov. Jerry Brown leaves a news conference after he unveiled his proposed 2015-16 state budget plan at the Capitol in Sacramento, Calif., Friday, Jan. 9, 2015.
Gov. Jerry Brown leaves a news conference after he unveiled his proposed 2015-16 state budget plan at the Capitol in Sacramento, Calif., Friday, Jan. 9, 2015. AP

As Gov. Jerry Brown and the Democratic-controlled Legislature begin their annual budget talks in Sacramento, Wall Street weighed in Wednesday on the side of caution.

“For California, a future revenue slump isn’t only possible, it’s expected,” the credit rating agency Standard & Poor’s said in a report.

An over-optimistic assessment of the state’s future revenue growth, the report said, would be “the most significant identifiable threat to the state’s ongoing fiscal recovery.”

The report comes two months after Standard & Poor’s raised the state’s credit rating from A to A-plus, and its tone aligns squarely with Brown’s budget stance. The fourth-term governor, a relatively moderate Democrat, is under pressure from social service advocates and some lawmakers of his own party to restore services cut during the recession.

Standard & Poor’s attributed California’s improving budget outlook more to reduced discretionary spending than to tax increases passed in 2012.

Significant new spending commitments, the ratings agency said, “could represent a failure of the state to heed the lessons of its past if they came at the expense of its budget reserve or rested on aggressive future revenue assumptions.”

Call David Siders, Bee Capitol Bureau, (916) 321-1215. Follow him on Twitter @davidsiders.

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