Fitch: California Better Equipped for Next Recession.

Fitch Ratings-New York-02 July 2018: There is a strong likelihood California’s next governor will encounter recession, though a new Fitch Ratings report says that the state is fundamentally better positioned to withstand the next inevitable economic downturn.

With Governor Jerry Brown’s final budget now official and his second term nearing an end, California continues to benefit from strong economic growth in the midst of the second-longest national economic expansion. Whether the state’s choice for next governor is Democrat Gavin Newsom or Republican John Cox, the state is likely to experience a “what goes up, must come down” scenario with a stiff economic test likely for California’s economy.

‘Governor Brown’s popularity among voters helped him to successfully raise taxes, establish a rainy day reserve and budget conservatively, advantages the next Governor may not have,’ said Senior Director Karen Krop. ‘However, the next governor will benefit from structural changes made over the last decade that will heavily affect how the state’s budget performs through the next inevitable recession.’

Among the post-recession changes made that underpin Fitch’s ‘AA-‘ rating for the state are lower voting requirements to approve state budgets, improved access to internal liquidity, transference of some state responsibilities to local governments, and a new funding mechanism for the rainy day fund. While the structural enhancements are in place, the next governor will face the same pressure to address issues such as healthcare, homelessness, infrastructure and access to higher education, among other quality of life challenges that will be magnified in a broader economic downturn. This makes the response when the next recession comes very integral to California’s future ratings and Outlook.

‘California after Governor Jerry Brown’ is available at ‘www.fitchratings.com’

Contact:

Karen Krop
Senior Director
+1-212-908-0661
Fitch Ratings, Inc.,
33 Whitehall Street
New York, NY 10004

Karen Ribble
Senior Director
+1-415-732-5611
One Post Street, Suite 900
San Francisco, CA 94104

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: [email protected]

Additional information is available on www.fitchratings.com



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