LOS ANGELES - Moody's Investors Service Inc. said yesterday that a downgrade "should be expected" on California bonds unless state officials can produce a fiscal 1993 budget by Monday.

The warning from Moody's, strongly reiterating a downgrading threat issued last month when the state sold revenue anticipation warrants, reflects specific circumstances under which a "budget delay is a more serious and immediate concern" in California than in other states, the agency said in a release.

Specifically, Moody's noted that California's cash squeeze is so severe that the state now must issue emergency scrip, known as registered warrants, to its creditors. Moody's added that this process is "a cumbersome and disruptive arrangement not relied upon since the 1930s."

California's severe problem sets it apart from other states with delayed budgets, Moody's said, and "absent closure on the budget by Monday, rating action should be expected."

Officials at Moody's and other rating agencies generally make credit analysis decisions based on the substance of long-term budget solutions, rather than simply on whether a budget is passed in a timely manner.

This year, however, the rating agencies put California on notice that they might view a delayed budget as proof of a critical failure in leadership, thereby raising prospects for a downgrade. State leaders have known for many months that they faced daunting budget problems.

California general obligation bonds are rated Aal by Moody's; AA by Standard & Poor's Corp., and AA-plus by Fitch Investors Service Inc. Officials at Standard & Poor's and Fitch have said they are monitoring California's budget developments closely.

Despite some progress, California lawmakers still were working on a fiscal 1993 budget yesterday. A spokesman for the Assembly Ways and Means Committee said a vote on any budget bills was unlikely until last night at the earliest.

But Franz Wisner, a spokesman for Gov. Pete Wilson, doubted whether legislators would produce a complete budget soon. "I don't see us passing a budget in the near future," Mr. Wisner said, adding that the Moody's warning "isn't a surprise" given the agency's past remarks.

State Democratic leaders, who previously favored balancing the budget by rolling part of the deficit into the next fiscal year, now seem willing to address the budget gap this year. The Democrats also are leaning toward balancing the budget without any tax increases. Gov. Wilson, a Republican, favors both of those approaches.

Moody's noted, however, that the magnitude of California's budget deficit, fiscal policy constraints embedded in the state's constitution, and the apparent consensus among political leaders to address the shortfall on the expenditure side alone makes "a budget solution extremely difficult to craft."

Mr. Wisner said a major sticking point involves public school spending, specifically about $1.1 billion that schools were granted in fiscal 1992 in excess of what is required by Proposition 98, a constitutional amendment guaranteeing minimum school funding levels.

"The recapture of money overpaid to schools" is a key issue, Mr. Wisner said.

He noted that the state Senate on Monday evening approved a proposal to cut at least $1 billion from public education funding, marking the beginning of a compromise on the contentious issue. But the Assembly rejected aspects of that plan.

Gov. Wilson has proposed more than $2 billion in school funding cuts from his initial budget proposed in January, while Democrats have favored only $600 million in reductions. The governor reportedly is willing to consider softening the blow of a $2 billion education cutback by lending about half that amount to schools, with a repayment schedule to be determined later.

State officials must close a budget deficit of almost $11 billion for an 18-month period that began last January and extends through June 1993. The shortfall is actually about $8 billion if certain cost-off-living raises and other adjustments are excluded.

The Democrats this week tentatively proposed a general fund budget of about $40 billion for the fiscal year that began yesterday.

Their deficit-cutting plan includes program reductions in areas such as health and welfare. They also would reduce local government funding by about $1.4 billion. To help offset the local cutbacks, state officials likely will give counties authority to impose sales tax increases without voter approval for up to the next three fiscal years.

Democratic legislature also proposed one-time savings, including a refinancing of certain state debt.

The budget impasse and a cash pinch forced the state yesterday to start issuing registered warrants - essentially promissory notes - for the first time since the Great Depression. The registered warrants, which carry a 5% interest rate, replace state checks to cover vendor payments, employee wages, and personal income tax refunds.

Most banks are expected to honor the warrants for customers who need cash immediately.

Constitutionally guaranteed payments, including debt service on state bonds, must be be paid with regular state checks. The state plans to cover those checks with ongoing tax receipts.

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