SAN FRANCISCO - Standard & Poor's this week revised the outlook on its A-plus rating for California State University to stable from positive.

The move comes as the university system prepares to price $450 million of revenue bonds Thursday, the first public sale from the California treasurer's office since the state adopted a revised budget last month to close a $40 billion-plus deficit in combined fiscal years 2009 and 2010.

"We didn't have a legal requirement per se to have a budget in place, but our underwriters felt, and we agreed, it would be best if we had a budget in place before we went to market, so we would have a full understanding of the revenue streams that back the bonds," said Tom Dresslar, spokesman for the treasurer's office.

Barclays Capital Inc. is lead underwriter for the CSU deal, which prices Thursday after a retail order period today. KNN Public Finance is financial adviser.

The treasurer's office hasn't set a date yet for a return to the general obligation bond market, saying a complete analysis of cash flows in the new state budget must first be complete. The state hasn't issued GO bonds since June.

The Cal State bonds are backed by the university system's revenues rather than directly by the state general fund.

The treasurer's office plans two other big sales next week: $400 million in water revenue bonds for the California Department of Water Resources, and about $800 million in University of California bonds.

Morgan Stanley is slated to run the books on the Department of Water Resources deal, and Barclays Capital is book-runner for the University of California system.

When the state's next GO deal comes, Merrill Lynch & Co. and Citi are slated to be joint senior managers, according to the state treasurer's office.

The Cal State system took lumps in the budget process, which was a factor in the outlook revision, according to Standard & Poor's analyst Carlotta Mills, who said the rating reflects CSU's status as the nation's largest higher education system and continued solid demand for its programs.

"We are concerned, however, about the impact that California's financial challenges could have on CSU, including the delay of state-funded projects and suspension of a funding compact with the governor," she said in a news release.

Moody's Investors Service affirmed its Aa3 underlying rating and stable outlook for CSU yesterday.

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