Lower Credit Rating Means Costlier Borrowing For California

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(Sacramento, CA)
Wednesday, February 4, 2009

Consumers with low credit scores pay higher interest rates on car loans and credit cards.  It’s a lot like that for California.  In the state’s case, Standard and Poor’s has downgraded its credit rating.  That means California will pay a higher interest rate to investors who buy state bonds.  

“Well, you don’t get a downgrade for good behavior.  Let’s put it that way.”

HD Palmer is with the State’s Department of Finance.  He says the big problem is the lack of a deal to fix the state’s 40 billion dollar deficit. State Treasurer Bill Lockyer says the downgrade’s probably not permanent – but it’ll take time to fix:

Well it seems to go down quicker than it goes up, but it can go up when there’s evidence of stable financing and we’ll just have to go make that case as soon as a budget gets adopted.”

California has 46 billion dollars in outstanding bond debt that could be affected by the new lower rating.  The state typically sells bonds to pay for roads, bridges and other public works projects.