The move by S&P lifts the state’s credit grade one step to AA-, the fourth-highest level. California now outranks Illinois and New Jersey and is tied with Michigan and Pennsylvania.

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California’s bond-credit rating was raised to its highest level in 14 years by Standard & Poor’s, which cited passage of a budget that puts surplus revenue into a rainy-day fund and pays down past deficit loans.

The move by S&P lifts the state’s credit grade one step to AA-, the fourth-highest level. California now outranks Illinois and New Jersey and is tied with Michigan and Pennsylvania.

Since Gov. Jerry Brown took office in 2011, California has swung to annual budget surpluses from deficits that exceeded $100 billion over a decade. Voters let him increase taxes and required him to deposit surplus money into reserves. The state’s economy has helped, with a surge in revenue from capital gains earned in Silicon Valley.

The record $115.4 billion budget, for the fiscal year that began July 1, puts $1.9 billion into California’s new rainy-day fund approved by voters in November that requires the state to save a portion of excess capital-gains revenue. The latest deposit will bring the total in the fund to $3.5 billion. That’s in addition to a separate $1.1 billion operating reserve account.

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The budget pays off the outstanding balance of $15 billion in deficit bonds sold under former Gov. Arnold Schwarzenegger and pays down loans previous governors used to cover deficits.

S&P last upgraded California in November 2014. The latest increase is the highest it’s been since an April 2001 downgrade. The state carries an Aa3 rating from Moody’s Investors Service, also its fourth-highest, and A+ from Fitch Ratings, the fifth- highest rank.

Moody’s on June 26 said the budget was positive for the state’s credit.

It said taxes on income, sales and corporations grew at a “very healthy” 7.7 percent, while the newly adopted budget limited expenditure increases to a “very moderate” 0.8 percent. The ratings firm noted state officials were holding the line on spending because voter- approved tax increases will begin to phase out next year.