LOS ANGELES -- Standard & Poor's Corp. this week affirmed California's triple-A rating, but made it clear the state will be closely monitored.

"The rating's on probation," Richard Larkin, a managing director of the agency, said yesterday.

Standard & Poor's on Monday affirmed its AAA rating on California's $12.4 billion of general obligation bonds outstanding, and removed them and all associated ratings from CreditWatch. The ratings were placed on CreditWatch with negative implications on Jan. 28.

But the agency said the rating outlook remains negative because of "continued uncertainty in the economic climate and the potential for future budget gaps resulting from onetime measures adopted for 1992."

According to Mr. Larkin, a main issue when Standard & Poor's met with state officials in recent days was the deferral of some budgetary problems into the current fiscal year, which began July 1.

The state ended fiscal 1991 with a $1.7 billion budget deficit, and overall closed a $14.3 billion gap with various tax increases and spending cuts.

Some of the adjustments entailed onetime actions, such as using excess funds from a state retirement system. Over-dependence on such solutions raises rating concerns, Mr. Larkin said, although California made enough long-term adjustments to allay concern.

For example, the state enacted structural reform by realigning health-care programs to make them a local rather than state responsibility. State leaders also approved automatic spending cuts that will be triggered by revenue shortfalls, and imposed a five-year freeze on cost-of-living adjustments for welfare benefits.

These changes represented "significant budget action that put the state on a more even keel," Mr. Larkin said.

He cautioned, however, that any future deficits could harm the rating unless state officials take timely action rather than fold problems into the next fiscal year.

There were "a lot of important issues raised this time around that hopefully won't reoccur," he said.

State Treasurer Kathleen Brown said in an interview yesterday that the tail end of discussions between state officials and Standard & Poor's focused partly on California's revenue assumptions and economic forecasting.

State officials stressed that the "economic assumptions were very conservative," Ms. Brown said, adding that efforts to address the record budget gap were a key factor in protecting the triple-A rating.

"In the end, it was the evidence of political will and political resolve" by the governor and legislators that helped persuade rating agency officials to maintain their ratings, she said.

In addition, she noted, state leaders sought to do everything that Standard & Poor's and the other agencies wanted, including establishing a prudent reserve and avoiding too many one-shot fixes to balance the budget.

"The state has to remain vigilant," Ms. Brown stressed, adding that safe officials must "take action as needed in order to maintain our balance."

On Friday, Moody's Investors Service and Fitch Investors Service also confirmed their triple-A ratings on California GO bonds.

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