Tags: | Fitch Ratings | New Jersey | Bond Rating

Fitch Drops New Jersey's Bond Rating a Record Seventh Time

By    |   Monday, 08 Sep 2014 03:27 PM

New Jersey's bond rating has been downgraded for the seventh time since Republican Gov. Chris Christie took office — a record for the state's governors — and for the second time this year alone, a new Fitch Ratings report shows.

The Wall Street rating firm cited several factors for the downgrade, reports The Star-Ledger, including New Jersey's ongoing poor economic performance, Chrstie's revenue forecasts that never materialized, and his order to cut $2.4 billion in funding for the state's pension system to fill the state budget gap.

Fitch said the pension cuts were a "repudiation" of a bipartisan plan for the retirement system, which state estimates say is underfunded by some $40 billion.

The rating on the state's debt has been lowered from an A+ to an A, after downgrading the state by one step in May while Christie was negotiating the state's $32.5 billion budget. Fitch said the the budget returned to "extremely narrow financial reserves."

Meanwhile, the state's economic performance "continues to lag that of the nation," and
spending demands "are expected to prolong the achievement of sound financial operations."

Fitch said it is keeping New Jersey under a "negative outlook," so the state's credit rating is not likely to be upgraded.

Two other agencies, Moody's Investors Service and Standard & Poor's also issued poor ratings for the budget season.

When credit ratings drop, states end up spending more in borrowing costs for projects such as schools and road upgrades.

State Treasury Department Spokesman Chris Santarelli said that Christie has acted responsibly by shrinking the pension payments, and has actually "contributed more to the
pension system than any previous governor" by not raising taxes.

Santarelli said there state has also marked "steady revenues and growing employment numbers" this summer, and that Christie has appointed a special task force to study the pension issue.

But Fitch analysts were not so optimistic, stating that New Jersey has a wealthy population and a broad economy.

"However, the state's economic performance has lagged the nation in recovery from the recent recession, with improvement in 2013 trailing off at the close of the year, and very slow year over year . . . employment growth continuing through 2014," the report said.

New Jersey is also carrying too much debt at a time, said Fitch, when "demands for school construction, environmental protection and transportation remain large," and the state's "net tax-supported debt as of June 30, 2014 equaled 7.4 percent of 2013 personal income as compared to a median of 2.6 percent for the states."

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New Jersey's bond rating has been downgraded for the seventh time since Republican Gov. Chris Christie took office - a record for the state's governors - and for the second time this year alone, a new Fitch Ratings report shows.
Fitch Ratings, New Jersey, Bond Rating
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2014-27-08
Monday, 08 Sep 2014 03:27 PM
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