LANSING – Wall Street rating agencies expressed tentative approval of Michigan?s action to raise taxes to help keep the budget balanced, saying it could have a positive effect on the state’s overall credit rating.

Standard & Poors and an analyst for Moody’s Investors Services said the decisions should help prevent any disruptions in the payment on state debt, and should be the start of positive steps to keep the state’s budget balanced.

Neither agency said the state’s credit rating should be either positively or negatively affected by the actions to boost the income tax and extend the sales tax on some services.

Both said the state still faces pressures from the overall state of its economy.

S&P analyst James Wiemken said that the stable outlook given the state last May is unaffected. While reaching a final decision on how to deal with the budget resulted in severe disagreements between legislators and Governor Jennifer Granholm, and “while these differences of opinion have severely challenged the state’s ability to pass a timely 2008 budget, actions taken last night and this morning suggest that the state will make good on this expectation” to establish structural balance to its finances.

Ted Hampton of Moody’s concurred. The state “has taken a positive step to move into structural balance,” he said. That will be good overall for the state’s budget rating.

While officials worried about the potential impact of a long-term shutdown on its credit rating, Hampton said a shutdown itself would not necessarily changed the state’s credit rating.

What was important was that the state took an effort to restore overall fiscal balance to its finances, Hampton said. “It appears on first blush that they have made some progress.”

S&P also pointed to several other positive recent factors for the state including creation of the new business tax and the quick resolution of a strike against General Motors.

The two agencies praised not only the tax increases the state enacted but also its willingness to cut the budget to help keep it balanced.

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