Standard & Poor's upgraded California's general obligation bond rating from A-minus to A today, a significant move that lifts the state out of the ratings agency's basement.
In the midst of recessionary state budget woes, S&P lowered California from A-plus to A in February 2009 and down to A-minus in January 2010. The agency last week dropped Illinois to A-minus in the face of pension funding problems, a downgrade that now gives the Midwest state the dubious worst-in-the-nation status.
S&P last year signaled that California might eventually be due for an upgrade after the state's finances and cash flow showed signs of strength. The agency has embraced recent efforts by Gov. Jerry Brown, lawmakers and voters to raise taxes and restrain spending.
"When it comes to the State Budget, I've called myself the town grouch," state Treasurer Bill Lockyer said in a statement. "I'm in a much better mood these days."
Lockyer praised state leaders and voters for their actions. But he also warned that the state faces "substantial long-term liabilities" and needs a "more stable tax system." He did not specify which long-term liabilities he meant, but Brown and the Legislative Analyst's Office have pointed to pension funding shortfalls and unfunded public retiree health care costs as problems that must be addressed.