Jan 14 Standard & Poor's Ratings Services on
Tuesday revised its outlook on California's credit ratings to
positive from stable, citing the governor's budget plan.
"The outlook revisions reflect our view that Governor Jerry
Brown's fiscal 2015 budget recommendation would build upon the
improvements made to the state's finances in recent years," said
S&P credit analyst Gabriel Petek in a statement.
S&P foresees raising the state's rating one notch within two
years, if California follows the $107 billion budget Brown
proposed last week, it said.
In the release on Tuesday, the credit agency affirmed its A
rating on California's $75.4 billion of general obligation debt
and its A- rating on the state's $10.3 billion of
S&P said it is also encouraged by the proposal's emphasis on
repaying debt and building reserves. While Brown did not suggest
specific action for making the teachers' underfunded retirement
system whole, he did take the "important first step" of
highlighting that the pension "is in need of a long-term funding
strategy," S&P added.
Brown, a centrist Democrat, supports a constitutional
amendment to enshrine a rainy day fund into law and proposed
setting aside $1.6 billion in reserve.
Still, progressives concerned about his suggestion to keep
spending on health and human services low could create obstacles
to the budget's passage.
The housing bust and 2007-09 recession sank California's
revenues, and just three years ago, state leaders were forced to
close a $24.5 billion budget gap. After voters approved a tax
increase, revenues began to rise, along with California's credit
quality. S&P and Fitch Ratings have both upgraded its general
obligation ratings over the past year.