Oct. 11--By Daisy Miao

CORRESPONDENT

The bad news is that California has the worst credit rating among all the states in America.

The good news? The credit rating for San Mateo County has risen to the highest possible level of AAA, according to a report by Standard & Poor's.

Budget director Jim Saco said the county worked hard for that distinction.

"We deserve that because we have high property (values) and (a) low unemployment rate, we have long-term prudent practices and strong financial policy," Saco said Friday. "Since 30 percent of our revenue comes from the state, and the state has a really low credit rating now, for a county in California to get a AAA rating is something remarkable."

San Diego County has also risen from a AA+ rating to AAA.

"The upgrades reflect the recognition that these counties are able to weather many uncertainties," according to a statement this week by Standard & Poor's.

The report also pointed to San Mateo County's "strong job market and a real estate sector that is sustainable due to high incomes."

The county also obtained Moody's highest credit rating earlier this year, making it the highest-rated county in the state by both major rating agencies, Saco said. The ratings mean the county can borrow money when needed at lower interest rates, he said.

"Given the current economic climate, these exceptionally high credit ratings demonstrate that the Board of Supervisors and

county staff continue to be responsible fiscal stewards of taxpayer funds," John Maltbie, county manager, said in a statement.

The county currently has a five-year plan to eliminate a structural deficit that would grow to more than $92 million by 2013 if no action were taken, according to projections.

The plan includes a hiring freeze through 2010 to reduce spending and minimize layoffs. The county will also maintain operating reserves of at least 15 percent in addition to 3 percent contingency reserves, Saco said.

The county is also working to find ways to become more efficient, tapping its own employees for ideas. County employees are invited to submit budget suggestions through the end of October to be considered for an award of up to $5,000.

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