Moody's Investors Service yesterday issued a stern warning to states tardily addressing budget deficits, saying delays are "symptomatic of serious financial imbalances."

The rating agency singled out California, Illinois, Massachusetts, and Rhode Island in a statement reviewing the credit implications of late budgets.

In general, the statement says, budget delays do not automatically lead to a long-term rating revision. But the resulting pressures on a state's short-term liquidity position can trigger a review, according to the statement.

Of the four states, California's yawning $8 billion gap "is a more serious and immediate concern." In fact, Moody's all but ensured a downgrade of the state's gilded Aaa if a satisfactory budget is not in place by July 6.

"Absent closure on the budget by Monday, "the statement says, "rating action should be expected."

Standard & Poor's Corp. rates California AA, having demoted the state from AAA in December 1991.

George W. Leung, vice president and managing director at Moody's, explained that when budget gaps reach the size of California's, the rating agency's normal focus on long-term factors must be forgone.

"What are the credit implications of no budget?" Mr. Leung said. "If it leads to liquidity problems, you can't look to a long-term perspective. Typically, it shouldn't be a problem, but certainly in the case of California it is a problem."

Massachusetts and Rhode Island, on the other hand, have smaller relative gaps to close and have made provisions for short-term expenditure needs. Through different approaches, the two New England states have arranged financing conduits to handle required outlays.

In Rhode Island, officials have the standing authority to disburse funds at the same pace established in the prior year, according to Moody's. In addition, the state's annual tax anticipation note issuance is authorized separately from the current $1.4 billion budget.

Massachusetts is avoiding the alarming short-term consequences of a budget delay by a "continuing resolution" allowing outlays until a formal budget is in place, the rating agency's statements says.

Illinois is the least troubled of the four laggard states, with "passage expected at any moment," said Steven Hochman, assistant director at Moody's. Late yesterday, the final fiscal 1993 budget had not been signed.

But California is worrisome to say the least. The Moody's statement held out relatively little hope for a resolution by the agency's July 6 deadline.

"The magnitude of California's $8 billion budget problem, given fiscal policy restraints embedded in its constitution, and the apparent consensus among political leaders to address the expenditure side alone, make a budget solution extremely difficult to craft," the statement says. "With the fiscal year having begun, major options related to school funding have been foreclosed."

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