by Calculated Risk on 1/13/2010 07:05:00 PM

From Bloomberg: California’s Credit Cut by S&P Amid Budget Deficit

California’s credit rating on $64 billion of general obligation bonds was cut by Standard & Poor’s today as [California] faces strains over a $20 billion budget deficit.

... the rating was lowered one level to A-, the seventh-highest investment grade. ... the company has a negative outlook on California debt, a sign its standing may decline further. ... S&P’s cut brings its rating on California closer to that of Moody’s Investors Service and Fitch Ratings. Moody’s rates the state Baa1 and Fitch at BBB.

More from Tom Petruno at the LA Times: California's debt rating cut to A-minus by S & P on budget woes

S&P worries that the state could face a cash crunch in March, before it receives the income tax payments due in April.

"There could be days in March when they go into a negative cash position," said Gabriel Petek, an S&P analyst in San Francisco.

Although Petek said he didn't believe California would be in jeopardy of missing any payments due on its debt, he said the government might again pay other obligations with IOUs, or the state might again require a short-term loan from Wall Street.

Possibly more IOU fun for California!