S&P: California's Estimated $2.7 Billion GO Bonds Assigned 'AA-' Rating
At the same time, S&P Global Ratings affirmed its 'AA-' long-term ratings and underlying ratings (SPURs) on California's $74.9 billion of GO bonds outstanding, as of July 1, 2016. In addition, we affirmed our 'A+' long-term ratings and SPURs on the state's $9.8 billion of lease revenue appropriation-backed debt. The outlook on all ratings is stable.
Finally, we affirmed the long-term component of the 'AA/A-2', 'AA+/A-1', and 'AAA/A-1+' ratings on some of the state's GO variable-rate demand bonds. The long-term component of the ratings is based jointly (assuming low correlation) on that of the obligor, California, and the various letter of credit (LOC) providers. The short-term component of the ratings is based solely on the ratings of the LOC providers.
"The GO ratings are also based on our view of the state's diverse and expanding economy, demonstrated commitment to aligning recurring revenues and expenses while paying down budgetary debts, good and increasing budgetary reserve levels, and strong liquidity," said S&P Global Ratings credit analyst Gabriel Petek.
The state's general fund serves as the source of all GO bond repayment, to which California has pledged its full faith and credit. State funding to the public K-12 school systems and to institutions of higher education are the only obligations that, according to the state's constitution, have a higher priority on general fund cash than GO debt service payments.