SACRAMENTO – Moody’s Investors Service – one of the nation’s three largest credit rating agencies – issued its official report Wednesday upgrading California’s financial outlook from “stable” to “positive.”

“It was not long ago when California’s credit teetered perilously close to non-investment grade,” said Treasurer John Chiang. “With IOUs and chronically late budgets in the rearview mirror, we’ve climbed out of the trough and are now considered not just a solid, but a highly-desirable bet for investors. The recipe: swapping out accounting gimmicks, deficit spending, and fake budgets for fiscal discipline, long-term planning, and a robust rainy day fund.”

The upgraded outlook is attributed to the state’s fiscal discipline; accumulation of rainy day funds; successively balanced budgets year-after-year; and improved liquidity, resulting from reduction of budgetary borrowings.

Moody’s also highlighted that continued fiscal discipline over the coming years could lead to further upgrades, and that California is in a sound financial position to weather an economic downturn, which some have predicted may be looming in the years ahead.

“The outlook for the State of California is positive and reflects the state's strongly performing economy and finances,” Moody’s said in a release. “Continued fiscal discipline in a healthy revenue environment or retention of reserves despite slowed revenue growth could support a higher rating within the next one to two years.”

Treasurer Chiang agreed. “We remain steadfast in our commitment to enhancing the state’s credit quality,” he said, “and to borrowing at lower costs so we can meet California’s growing infrastructure needs. This will allow us to invest more in California schools, roads, and affordable housing.”

Moody’s analysis also affirmed the following:

– An Aa3 rating on the State of California's outstanding general obligation bonds.
– An A1 rating on the state's outstanding lease debt, its outstanding appropriation debt, and outstanding school fund apportionment lease revenue bonds.
– An A3 rating on outstanding debt of certain state regional centers.