(Bloomberg News) California's ratings outlook was revised to positive from stable by Standard & Poor's as the most-populous state prepares to sell $2 billion in general- obligation bonds.

The state's A- long-term and underlying ratings on $73.4 billion of general-obligation debt was affirmed, S&P said today.

California is poised to receive a higher rating if its revenue comes closer to projections in Governor Jerry Brown's budget, S&P said. Brown is promoting a November ballot measure that would raise income taxes on people who earn more than $250,000, and increase sales taxes statewide, to avoid further cuts to education.

"Barring any other credit deterioration, we think the state is poised for credit improvement -- and potentially a higher rating -- pending its ability to better align its cash performance and budget assumptions," said Gabriel Petek, an S&P analyst, in a written statement. "By downsizing its spending base, the state has corrected a significant portion of its budget imbalance."

The improved credit outlook comes as the state prepares to sell $2 billion of general-obligation bonds March 1 and as much as $1 billion of cash-flow notes Feb. 22.

S&P's California rating is its fourth-lowest investment grade, and the lowest of any state. Moody's Investors Service gives it an A1, the second-lowest after Illinois.

A California general-obligation bond sold in March 2010 and due in 2022 yielded about 75 basis points more than an index of AAA rated 10-year securities on Jan. 30, according to data compiled by Bloomberg. That's down from 170 basis points after the sale and less than the 109-point two-year average. A basis point is 0.01 percentage point.

State and local debt of California returned a total of 14.8 percent last year, according to a Bank of America Merrill Lynch index. That's more than the 11.2 percent for the full $3.7 trillion municipal market, the 9.8 percent for U.S. Treasuries and the 7.5 percent for investment-grade company debt.

"Whenever ratings agencies take positive action, ultimately it should accrue to the benefits of taxpayers by constraining borrowing costs," said Tom Dresslar, a spokesman for state Treasurer Bill Lockyer, in a telephone interview.