Standard & Poor’s has affirmed its A-minus long-term underlying rating on California’s general obligation debt and maintained its negative outlook due to fractured budget negotiations.

“We continue to monitor the state’s liquidity position in light of its budget situation,” Standard & Poor’s analyst Gabriel Petek said in a report Monday. “Cash-flow management is an integral part of the state’s credit profile — and an area we believe could encounter stress in the absence of a budget agreement.”

Petek said in the report that any downgrade to the state’s rating would likely be related to liquidity problems.

The agency said there is “significant risk” the state’s liquidity could be insufficient to fund operations because of the drawn-out budget stalemate.

The result, Standard & Poor’s said, could be aggressive cash-management measures by the state controller. The controller’s office has issued IOUs in the past to bridge California’s liquidity problems during drawn-out budget negotiations.

However, Standard & Poor’s said that if the state is able to enact a budget in reasonable time and issues revenue anticipation notes, then the outlook could be returned to stable.

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