LOS ANGELES — The restrained budget proposed by California Gov. Jerry Brown will not require the state to issue short-term notes to smooth out cash flow in fiscal 2017, according to Fitch Ratings.

Brown released his proposed budget last week into an environment of robust revenue growth that Fitch said reflects continued expansion of the California economy.

The state's revenues for fiscal 2016 are expected to exceed last year's expectations by $3.5 billion for total revenues of $121.5 billion, according to the budget projections.

If the state is able to avoid issuing revenue anticipation notes in fiscal 2017, it will be the second year in a row.

California Treasurer John Chiang told The Bond Buyer in June that the state's ability to not issue RANs for fiscal 2016 was only the second time in more than a decade that the state has not needed to issue the short-term notes.

"It shows how dramatic of a turn California has taken since 2009 or 2010," Chiang said.

The state has typically issued anywhere from a $1 billion to $10 billion note since the 1990s.

The state needed to borrow $10 billion in RANs as recently as 2012.

Fitch, in a Jan. 12 commentary, said Brown's budget continues his policy of restrained spending growth and increased contributions to the rainy day fund that have resulted in fiscal stability. Those efforts and the result affect spurred Fitch to upgrade the state's general obligation rating twice in the past three years.

Fitch rates California A-plus after an upgrade from A in February 2015.

Standard & Poor's raised the state's rating to AA-minus in July 2015 from A-plus. Moody's Investors Services raised the state's rating to Aa3 on June 2014 from A1.

Brown's budget would set aside $3.6 billion in the state's rainy day fund, $2 billion more than the amount required by law. Under Brown's plan, the rainy day fund would have a balance of $8 billion by the end of 2017.

The budget would also reduce budgetary borrowing from $3.9 billion to $2.5 billion by the end of fiscal 2017, as the state repays special funds.

A significant amount of the increase will be automatically allocated to K-14 education under Proposition 98, but it would also support increased spending for Medicaid and higher education under the governor's budget. His proposal would also earmark $2 billion in one-time spending for deferred maintenance and state building renovations and replacement.

Fitch analysts said they "believe the approach taken in the budget proposal is prudent and bodes well for continued fiscal stability in light of the state's volatile revenue stream and the possibility of future economic downturn."

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