New Jersey Cut by Moody’s as Christie Gets Ninth Debt DowngradeTerrence Dopp
New Jersey had its credit rating cut one level by Moody’s Investors Service, giving Governor Chris Christie the ninth downgrade of his tenure as he considers a 2016 presidential run.
The reduction to A2, the sixth-highest rank, brings the Moody’s mark in line with those of Standard & Poor’s and Fitch Ratings. The move covers a combined $32.2 billion of debt, New York-based Moody’s said in a statement late Thursday. The company put a negative outlook on the state, meaning more rating reductions may be ahead.
The 52-year-old Republican governor’s tally of downgrades is three more than the previous recordholder, Democrat James McGreevey, who made minimal pension payments for three straight years and borrowed to balance the budget until the state Supreme Court banned him from doing so. Christie took office in 2010.
The rating cut was based on “the lack of improvement in the state’s weak financial position and large structural imbalance, primarily related to continued pension contribution shortfalls,” Moody’s said. “We expect liquidity and structural balance to remain very weak through fiscal 2016.”
Christie has used town halls to push his plan to fix the fiscal stress that led to the downgrades. Even as he makes record pension payments, the fund’s gap is growing as he shortchanges contributions for a sixth year. Absent adjustments, pension and benefit costs will consume a quarter of next year’s budget.
Investors demand additional yield to buy New Jersey debt. An index of 10-year New Jersey bonds yields about 2.74 percent, about 0.8 percentage point above top-rated municipal bonds, data compiled by Bloomberg show. The spread is about double the level from a year ago.
“Moody’s action today once again underscores the urgent need for structural reforms of our public-employee pension and health-benefits system,” Joseph Perone, a spokesman for the state Treasury, said in an e-mailed statement.