California is not Greece, according to a report by the bond rater Standard & Poor’s. 

As Californians, we have seen this comparison made before by the press and news media. 
However, the Standard and Poor’s report illustrates that the comparisons made by the
press and news media are overblown.

“We believe that some of the perceptions about the similarities between California and
Greece occasionally noted in the media do not hold up to close scrutiny,” Standard &
Poor’s analyst Gabriel Petek said in the report.

Standard & Poor’s rates Greece BB-minus on a negative watch while it rates California
A-minus with a negative outlook. Standard and Poor’s Petek said, “It is incorrect to
conclude that both governments have comparable debt burdens.”

It appears that California is far better off according to the report, for example:

    >California’s Gross State Product, (GSP) similar to a GDP reached $1.9 trillion in 2010
        as compared to Greece’s GDP of $305 billion

    >California’s real GSP growth rate is projected at 2.9% in 2011 versus Greece’s 
        negative 3.5%

    >California is one of the top ten largest economies in the world. Greece is not!

    >California’s debt to GSP is only 4.6% as compared to Greece’s debt to GDP is 153%

California’s capacity to repay its debt, despite worse budget problems compared to other
states remains strong, according to the rating agency.

The Standard and Poor’s report cited California’s economic diversity, modern economy and
the elasticity of many of its markets for its strength. 

Face it; Greece does not have a technology hub like the Silicon Valley.  It does not have a film or
movie industry like Hollywood.  It does not have an aerospace industry that includes commercial,
military and space exploration.  It does not even come close to the size and diversity of California's
agricultural and food processing sector.

Petek said, “Greece’s budget problems are also worse compared to California since the
Golden State has a comparably better political environment and smaller budget imbalances,
even when adjusting for a wider scope of spending.” In California, the state constitution
requires the state to adopt a balanced budget, which is not the case in Greece. Additionally,
California must pay debt service ahead of all other obligations except for education, which is
the top expenditure.

Petek said, “California benefits from federal budget support while Greece is forced to
rely on extraordinary loans from the European Union and the International Monetary Fund.”
The report did note some similarities between the two economies, including that both have
experienced severe recessions with high unemployment rates and both have and currently face
deep budget deficits that have increased borrowing costs.

“Both governments face deep budget deficits, which we have seen complicated liquidity
management for California and undermines investor confidence in the fiscal credibility
of Greece,” the report said. Additionally, the report identifies that a majority of California’s
budget has also already been allocated through voter-mandates, leaving the legislature
with little flexibility.

It doesn’t appear that there is much more to compare other than the ocean beaches, sunshine and
that both get to share significant headlines thanks to the press and news media.  So the next time
you hear or read a comparison between California and Greece, send the progenitor this article.

Tim Johnson
California Business Minute