California's finances are improving in the wake of two revenue-generating ballot propositions passed last month, and more fiscal reforms would be "viewed positively," according to Fitch Ratings.

"The state's fiscal recovery is incomplete and challenges remain, but continued economic improvement, a demonstrated commitment to more sustainable budgetary operations and progress on reducing budgetary debt would be viewed positively by Fitch," the ratings agency said in report Wednesday.

Fitch rates California below every other state at A-minus, assigning a stable outlook.

California general obligation bond spreads versus the benchmark Municipal Market Data triple-A rated debt index have tightened since the Nov. election, amid speculation that the state's bond rating may be upgraded.

The state constitution prioritizes general obligation bond debt service second only to education, which is one of the main reasons many investors believe that California is unlikely to default on its debt.

Standard & Poor's rates the state A-minus with a positive outlook, also the lowest of all other states, while Moody's Investors Service gives California an A1 rating, one notch above Illinois.

Proposition 30 temporarily raises sales taxes, and income taxes on the wealthy - raising an estimated $6 billion annually - while Proposition 39 changes the method multi-state corporations must calculate their income taxes - adding an estimated $500 million annually to the state's general fund.

Fitch said California's finances over the last two decades have suffered from volatile revenue swings, and periodic fiscal and cash flow crises. It said the state's ability to handle these problems have been hindered by "numerous restrictive voter initiatives and by a highly partisan policy making environment."

Fitch said California has made notable progress since the recession and fiscal crisis of 2008 and 2009, adding that the two measures passed last month are a continuation of the positive trend.

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