California´s credit rating has been lowered to near junk bond status by one of the nation´s top credit agencies. The state´s credit rating was already the worst in the nation.

Standard and Poor´s today cited the state´s pending gubernatorial recall election and delays in adopting a new state budget as reasons for the downgrade. The state is facing a record $38 billion deficit.

The announcement came as Senate leaders announced a budget agreement to that would cut the deficit to about $8 billion next year. Credit rating officials did not return telephone messages seeking comment on the proposed plan. State Treasurer Phil Angelides estimates that the downgrade will cost taxpayers $1 billion over 30 years.

California is operating for the first time in history completely on borrowed money.