Moody’s considers rating downgrade for loan program offered through Calif. pension funds

Moody’s may downgrade Calif. pension funds’ rating

SACRAMENTO, Calif. — Moody’s Investment Service says it is considering downgrading ratings for programs tied to California’s two giant pension funds.

Moody’s said Friday it would review its AAA ratings for long-term borrowing through the municipal credit enhancement programs of the California Public Employees Retirement System and State Teachers Retirement System.

Those programs enable local agencies to use the pension funds’ credit ratings when they issue bonds.

Moody’s said it was taking the action mainly because of a drop in the market value of the pension funds’ assets and California’s state budget deficit.

A CalPERS spokeswoman, Patricia Macht, said a drop in ratings could force municipalities to pay higher interest rates when they borrow using CalPERS credit ratings. It also could reduce fees CalPERS gets through the program.