According to Moody’s Investors Service, California’s credit rating has moved up for the first time in five years.
The “general obligation bond” rating went from a Aa3 rating to a Aa2 rating, finally moving California ahead of several states to their highest rating since 2001.
The hike was announced Monday after a series of studies showed how California’s economic growth was now outpacing the United States growth. According to a UCLA study this is largely due to the tech boom of the state, as well as California not having a reliance on industrial and manufacturing sectors that are triggering slower growth in Eastern states.
Moody’s hasn’t been the only agency that noticed California’s newfound economic stability. In August, Fitch Ratings moved up California’s score from AA- to AA. This was almost in sync with Moody’s hike, as Fitch has not marked California with a AA score since 2002.
The California Globe reached out to former Economic professor James Stein on exactly what this means for California.
“California is coming out of the funk it was in after 9/11,” noted Professor Stein. “Since 2001 it has experienced that economic downturn, the Great Recession, and the budget crisis that slashed almost every public department to the bone. California was on the brink of creditors giving them a ‘junk’ status, which means that any good investor would not put money into that and expect payment back. For context that’s what Ford is at right now.
We’re not out of the woods yet. The state still has to deal with how it will fund state pensions and health care, and all it will take is one major natural disaster to throw the state off again. But this does show creditors trust in California, as the state continues to pay down debts. Having a surplus is nice too.”
While the bump has been given praise by several government organizations, the rating may change again in a few years time.
California’s current economic growth is projected to slowdown by 2020 due to the slowing of the US economy in general and repercussions from earlier trade tariffs.
Nonetheless, the new ratings are a sign of the recovery of California’s fiscal issues of the late 2000’s and early 2010’s and will help prepare California for any economic issues going into the new decade.
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