New Jersey Credit Outlook Revised to Negative by FitchRomy Varghese
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.