Standard & Poor’s this week affirmed its AA rating and stable outlook on Cook County, which has $3.5 billion of outstanding general obligation bonds.

The affirmation reflects the Illinois county’s good financial management practices as well as its moderate debt burden, a stable economy anchored by Chicago, and taxing ability, among other strengths.

Challenges include a massive health care system that accounts for about a third of the county’s annual $3 billion budget, pension and retiree health-care benefits costs, and “crimped revenues” due to the recession and a recent decision to roll back an unpopular 1% sales tax hike.

The affirmation comes a week after Moody’s Investors Service downgraded Cook’s GO rating to Aa3 from Aa2. The agency cited several factors, including a 2009 accounting error that inflated general fund revenues by $90 million.

In its affirmation report, Standard & Poor’s noted that the 2009 error, combined with a $25 million use of general fund revenues to support the county health fund, could “mean a decline in both financial position and liquidity to potentially just adequate levels.”

“We anticipate that, with a new administration and perspective, management will likely exercise fiscal discipline to continue to balance its budget in the face of cost pressures,” analyst Helen Samuelson wrote in the report. “If the county is unable to accomplish this, and replenish reserves to higher levels, it will affect the rating.”

Cook is expected to enter the market next month with a refunding issue aimed at generating debt service savings crucial to balancing the fiscal 2012 budget.

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