LOS ANGELES - Standard & Poor's upgraded California's general obligation rating to AA-minus from A-plus Thursday.
"The rating action follows enactment of California's 2015-2016 budget, which, in our view, marks another step forward in the state's journey toward improved fiscal sustainability," said Standard & Poor's credit analyst Gabriel Petek.
S&P in May had placed its A-plus California GO rating on CreditWatch with positive implications, pending the outcome of budget negotiations.
Thursday's upgrade resolves the CreditWatch. The rating outlook is now stable.
The agency also raised the rating on California's general fund appropriation-secured debt to A-plus from A.
Petek said the upgrades reflect and adopted budget that pays down $1.85 billion in debt obligations while following a restrained spending model.
The budget projects to leave the state with $4.6 billion of reserves, which is about 4% of expenditures, the agency said in a release.
The result is "favorable to credit quality," Petek said.
While the budget should produce modest surpluses for three years, S&P said, those are largely already spoken for by scheduled rainy day fund transfers.
