SACRAMENTO (AP) — California’s credit rating is rebounding, reflecting the relative stability of its state budget.

Moody’s Investors Service upgraded the state’s rating Wednesday from A1 to Aa3. It cited the state’s improved financial position, its governance changes, and management of its debt.

Moody’s change follows similar upgrades last year by Standard & Poor’s and Fitch Ratings as California began recovering from the recession. S&P upgraded California from A- to A in January 2013, while Fitch upgraded the state from A- to A in August.

It’s the first time California has had such a high rating from Moody’s since 2001. Even so, it remains relatively low.

California is tied with Arizona and Connecticut for 46th place in Moody’s state ranking. New Jersey and Illinois are lowest.

Gov. Jerry Brown signed a $108 billion general fund budget last week that pays down debt, builds a rainy day fund and provides additional money for schools and health care. The state plans to put $1.6 billion in the rainy day fund by the end of the fiscal year.

“The state is making positive governance changes to protect it in the future,” Moody’s wrote.

Brown said the budget reduces debt, invests in public schools, shores up the teachers pension fund and guards against another economic downturn. Part of the budget package he signed calls for increased contributions from the state, school districts and teachers over time to pay down California’s $74 billion in unfunded teacher pension liabilities.

Moody’s also noted that employment in California is growing at faster than national levels and the real estate market continues to recover.

“California in the last three years has made great strides in managing its financial affairs,” state Treasurer Bill Lockyer said in a statement. “Moody’s action recognizes that progress and the strong, sustained fiscal discipline shown by the governor and Legislature.”