Sacramento, CA — A rating agency has increased California’s bond rating to “High Grade” or AA-. The upgrade by Fitch Ratings Inc. matches the rate of the other two leading rating agencies, showing confidence in California’s fiscal management.
California State Treasurer John Chiang reports, “The upgrade places our bonds in the coveted “high grade” category.” The move by Fitch follows similar rating increases by two other firms, Standard & Poor’s and Moody’s Investor Services as reported here in July 2015.
Treasurer Chiang says, “I am gratified that all three rating agencies clearly acknowledge the progress that the governor and the Legislature, working together, have made toward putting our fiscal house in order.” He adds, “It not only saves taxpayers money but allows us access to more affordable capital to rebuild our crumbling infrastructure and invest in our future.”
The AA- rating helps lower interest costs for billions of dollars in future borrowing. Chiang reports, “Refinancing existing, higher-interest debt saved the state more than $1.5 billion since January of 2015.” General obligation bonds are backed by the state’s full faith and credit.
A statement by Fitch says, “California is fundamentally better positioned to withstand a future economic downturn than has been the case in prior recessions due to numerous institutional improvements. The state has demonstrated strong budget management during this period of economic recovery and expansion…”
California should expect to benefit from the new high-grade rating as soon as a few weeks from now when Treasurer Chiang will be going to the market to sell general obligation bonds to finance important public works. Currently, the Fitch Ratings for the state remains an A+.