S&P Global Ratings Friday revised its outlook to positive from stable on New Jersey general obligation bonds.

The rating agency highlighted the state government’s recent payments to its underfunded state pension system.

“The outlook revision follows the second consecutive year the state has budgeted the full annual actuarially determined contribution to its retirement systems,” S&P credit analyst David Hitchcock said in a statement.

S&P affirmed its A-minus rating of New Jersey GOs.

“We believe that there is at least one-in-three probability New Jersey will be able to sustain at least a 40% Governmental Accounting Standards Board funded ratio or higher in its combined retirement funds despite likely investment losses in fiscal 2022, while also maintaining structural balance in its operating funds,” according to the release.

S&P said the state still faces significant fiscal and economic challenges, including potential revenue drops under current economic conditions as well as a “history of substantially underfunding the state retirement systems’ actuarial contributions before fiscal 2022,” according to the S&P release.

New Jersey has $186 billion in unfunded pension obligations, one of the highest rates in the nation. Over the last two years, Gov. Phil Murphy has leveraged budgetary surpluses to fully funded the state’s annual obligation to the pension system for the first time in nearly 25 years.

“Not only have we gotten our fiscal house in order, we’ve fortified it,” Murphy said in a statement after S&P’s announcement.

S&P also affirmed its BBB-plus rating on certain bonds secured by state appropriations, its BBB rating on New Jersey Economic Development Authority department of human services pooled financing program bonds, and its BBB-minus rating on South Jersey Port Corps state moral obligation debt. Those bonds also get the new positive outlook.