Standard & Poor's gave Texas government bonds an AA+ rating on Thursday and said the state's economy will likely recover quicker than most other states.
The rating determines what interest the state pays and is just short of the top AAA rating. It tells investors that Texas has a very strong capacity to meet its financial obligations.
S&P analysts praised Texas for strong cash-management practices. But the rating agency warned that the current budget crisis and future demands to pay for public schools could create problems later.
S&P said Texas was unlikely to receive the top AAA rating because lawmakers have not addressed a structural deficit created by an underperforming business tax.
The business tax was changed in 2006 and it has failed to meet expected revenue targets ever since.