BUSINESS
04/25/2011 04:48 pm ET Updated Jun 25, 2011

S&P: California's A-Minus Rating Will Remain With A Negative Outlook

Standard & Poor's Ratings Services on Monday affirmed California's A-minus general obligation rating with a negative outlook, but warned any ratings downgrade would likely be related to liquidity problems.

"The outlook on California's rating remains negative, mostly because of our view of the risk to the state's cash position in the coming months if state lawmakers are unable to reach the level of political consensus necessary to resolve the remaining projected budget deficit," the credit rating agency said in a statement.

California lawmakers have so far agreed to spending cuts and other measures to tackle $11.2 billion of the state's $27 billion budget gap and S&P said that marked "good progress."

But it added that a protracted stalemate in dealing with the remainder of the gap "could expose the state's liquidity to significant risk of being insufficient to fund all of the state's operations," possibly leading to aggressive cash management measures by the state controller.

(Reporting by Karen Pierog, Editing by Andrew Hay)

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