New Jersey’s credit outlook was revised to negative by Fitch Ratings, which cited budget strains and ballooning retirement costs.
Fitch joined Moody’s Investors Service and Standard & Poor’s, which also have a negative outlook on Garden State debt. New Jersey has about $2.4 billion in outstanding general-obligation bonds, according to Fitch.
The outlook change reflects budget pressure and “significant and growing funding needs” for the state’s retirement obligations, Fitch said today in a statement.
Governor Chris Christie, a 51-year-old Republican who began a second term in January, said last month that the pension was underfunded by $52 billion after a decade of expanded benefits and missed payments. His proposed $34.4 billion budget for fiscal 2015 includes a record $2.25 billion pension payment.
“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,” Christopher Santarelli, a treasury spokesman, said by e-mail.
An increase in pension contributions “is likely to conflict with other long-term demands, such as infrastructure needs, property tax relief and school funding,” Fitch said.
Moody’s revised New Jersey’s outlook to negative in December, while S&P did so in September 2012. All three companies have cut ratings on state debt one level since Christie took office in January 2010. Fitch rates New Jersey, AA-, its fourth-highest investment grade.
A New Jersey general-obligation bond due in 2023 traded today at an average yield of 2.6 percent, a risk premium of O.15 percentage point over benchmark munis and lower than the 0.23 percentage point average since January, data compiled by Bloomberg show.