New Jersey Debt Gets Downgraded

Wall Street analysts gave a dour assessment of New Jersey’s finances today, lowering their outlook of the state’s debt from stable to negative and panning Gov. Chris Christie’s new $34.4 billion budget….

“Fitch believes that meeting the requisite increases in pension contributions will continue to be challenging and is likely to conflict with other long-term demands, such as infrastructure needs, property tax relief, and school funding,” the report said….

The analysts said the budget plan got a bad review because it “relies on one-time measures” instead of stable funding sources and includes only a small cushion of cash reserves, $301 million, to absorb the shock of any unexpected costs….

In December, another major ratings agency, Moody’s Investors Service, also lowered its New Jersey debt outlook to negative for many of the same reasons. Both agencies and a range of economic experts say the big question is how New Jersey will cope with rising pension payments every year.

Don’t look for things to get better, either:

“The agency’s change in outlook puts an even greater emphasis on the need to bring further reform to New Jersey’s long-term liabilities, specifically the unsustainable costs of public employee pension and health benefits systems — a subject the governor stressed in his budget address in February,” Santarelli added….

The Democrats who control the Legislature have ruled out shifting any more costs to public workers, saying they have made enough concessions. Senate President Stephen Sweeney (D-Gloucester) has also said that Christie must keep his word on making the steeper pension contributions this year — or Democrats will shut down the government.

I thought shutting down the government was something only evil Republicans do? But we continue…

The state’s long-term debt, including financial obligations for retirement benefits, rose to a record $78.4 billion in 2013, an increase of $6.6 billion from the previous year and driven mostly by pension and health-benefit costs for public workers, according to a Treasury report last month.

New Jersey’s current AA- debt rating is the fourth highest Fitch assigns.

The agency had downgraded New Jersey’s debt in 2011, and warned that it could do so again if the state’s economy continued to grow at a slow pace, or if it saw “an unwillingness to address … its growing long-term liabilities, or continued deterioration in the state’s budgetary flexibility.”

At least everyone’s being consistent.

via Chris Wysocki.

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