New Jersey’s credit outlook was reduced to negative from stable by Moody’s Investors Service, which cited a “sluggish economic recovery” and a growing pension burden.
The change affects about $32 billion of New Jersey general-obligation bonds and appropriation-backed debt, the New York-based ratings company said in a report yesterday. The state has a grade of Aa3 from Moody’s, three steps below the top. Only Illinois and California have lower ratings among U.S. states.
The negative outlook is “based on the expectation that the state will be challenged to improve its very weak liquidity position, due to the state’s sluggish economic recovery, which has hindered revenue performance, and the ongoing pressure of statutorily scheduled pension contribution increases,” Moody’s said in the report.
Tax revenue has increased every year under Republican Governor Chris Christie, who was re-elected last month, though at a slower pace than he anticipated. For the fiscal year that ended June 30, Christie revised forecasts as collections fell short. He initially proposed revenue of $31.7 billion and lowered that to $31.3 billion and then to $31.2 billion.
When Christie was asked about the outlook change today as he was serving hamburgers, fruit and macaroni salad to the needy during an event at Eva’s Kitchen in Paterson, New Jersey, he said he was “not here to talk about” it.
Investors in the $3.7 trillion municipal market demand 0.1 percentage point in extra yield to own the state’s general obligations instead of AAA debt, data compiled by Bloomberg show. The difference was almost 0.5 percentage point in January.
William Quinn, a spokesman for state Treasurer Andrew Sidamon-Eristoff, said Moody’s didn’t give sufficient weight to positive developments.
“Over the last year, the state has posted a record of 11 consecutive months of job gains in line with the national average,” Quinn said. “With the last three years of increases in annual pension funding, the state is also acting responsibly in dealing with its long-term liability issues.”