New Jersey’s Debt Reaches Record $40.4 Billion in 2013Elise Young
New Jersey debt rose 4.1 percent to $40.4 billion in fiscal 2013, the highest growth rate in four years even after Governor Chris Christie’s pledge to reduce the pace of borrowing.
Obligations, which include those for retiree health care, rose 9.2 percent to $78.4 billion, according to the annual debt report released today at a meeting of the state Commission on Capital Budgeting and Planning in Trenton.
James Petrino, director of New Jersey’s public-finance office, told panel members that the increase was driven by borrowing for the Transportation Trust Fund, which finances road and mass-transit work, and by pension and health benefits. Christie, a second-term Republican, last year lowered budget allocations to the transportation fund as revenue trailed projections, and borrowed $875 million instead.
Until 2013, New Jersey reduced the pace of borrowing for four consecutive years. The 4.1 percent rate was more than double 2012’s 1.9 percent and is the highest since 2009, when it was 4.9 percent and the state owed $35.5 billion. Under previous governors, New Jersey debt more than doubled over a decade, and it has the nation’s third-highest tax-supported burden, according to a report last year from Standard & Poor’s.
Moody’s Investors Service cited a “sluggish economic recovery” and a growing pension and retiree-health benefit burden on Dec. 17 when it changed the state’s outlook to negative from stable.
In April 2011, Moody’s cut New Jersey’s bond rating one step, to Aa3, the fourth-highest level. Fitch Ratings also cut its rating that year, as did S&P, which assigns the state a negative outlook. Only Illinois and California have lower Moody’s ratings among U.S. states.
New Jersey’s pension deficit reached $53.9 billion in 2010 after the state expanded benefits and skipped payments over a decade. The gap fell to $36.3 billion after Christie signed bills that boosted employee pension and health-care contributions, raised the minimum retirement age for new workers and froze cost-of-living adjustments. It rebounded to $47.2 billion as of July 1, 2012, as Christie made only partial contributions.
Christie, 51, signed a law in 2011 requiring the state to make one-seventh of its pension contribution in fiscal 2012 and then raise the payment each year until it reaches the full annual amount in 2018.
New Jersey faces a $1 billion increase in pension and debt payments in fiscal 2015, Christie said in his State of the State speech last month. In a radio interview on Feb. 3, he said that the state will make the “appropriate payment,” though at a cost to health care, education and public safety.
The state typically releases the debt report in December or January, and an annual financial report in January. Petrino said he didn’t know why the reports were late this year. He told Senator Paul Sarlo, a Democrat from Wood-Ridge and member of the commission, that the financial report should be ready “in the next several weeks,” and he wasn’t sure if it would be available before Christie’s Feb. 25 budget presentation.