Standard & Poor's improved California's bond outlook from stable to positive Tuesday, a signal that the deficit-ridden state could be in line for a ratings bump.
The state's A-minus rating is S&P's lowest among U.S. states.
In a 15-page analysis, S&P said that the state's new majority-vote budget requirement is a major reason why the state now has a positive outlook. Voters approved the requirement in 2010 in Proposition 25, which also docks pay if lawmakers submit a late budget.
S&P also credited a rise in revenue growth as the economy recovers, as well as a series of recurring budget cuts that Gov. Jerry Brown and Democratic lawmakers enacted last year.
If the state does not approve taxes to help bridge the deficit this fall, S&P analyst Gabriel Petek said, lawmakers and Brown need to ensure that strict trigger cuts are in place beforehand. The governor has proposed mostly slashing payments to K-12 schools and higher education.