New Jersey Governor's Budget Does Little to Change Credit RatingBy
S&P says Democrat’s plan ‘does not significantly change’ view
Pension contributions still fall far short of what’s needed
The political party running New Jersey has changed, but the financial problems squeezing the Garden State haven’t.
The $37.4 billion budget released by Democratic Governor Phil Murphy “does not significantly change” New Jersey’s financial outlook, despite a slight improvement to its deeply underfunded retirement system, according to S&P Global Ratings.
While its pensions by July 1 had enough saved to cover about 35.8 percent of the benefits that have been promised, up from 30.9 percent a year earlier, the company said that’s still below an acceptable threshold. And the Democrat’s plan will continue New Jersey’s long, bipartisan tradition of shortchanging the retirement system -- the consequences of which caused a record number of downgrades under former Republican Governor Chris Christie.
“Governor Phil Murphy’s fiscal 2019 budget proposal does not significantly change S&P Global Ratings’ view of credit quality, as the governor’s pension funding proposal represents a continuation of the previous administration’s pension funding policy,” S&P credit analyst David Hitchcock wrote in a report released Monday
S&P ranks New Jersey as A-, seventh-highest investment grade and lower than any other state except Illinois. Moody’s Investors Service also rates it seventh-highest, while Fitch Ratings has it one step higher. All assigned stable outlooks.
Though the pension contribution for the fiscal year that starts July 1 would be a record $3.2 billion, or 28 percent higher than the current year, it’s still barely over half what actuaries say is needed, according to the report. Even if Murphy, a Democrat, were to fund a five-year contribution increase to reach that ideal level, liabilities would stay high and ratios low “for some time,” according to S&P.