Fitch: New Jersey challenged by pension funding levels

New Jersey’s revenue projections for fiscal 2013 pose a “notable downside risk,” and its pension funding level will continue to deteriorate even after cost-saving changes to retirement benefits, according to Fitch Ratings.

“While we believe the need to address revenue underperformance is important, we expect the state’s significant and growing unfunded pension and employee benefit liabilities, combined with its above-average debt burden, to remain the key challenges for New Jersey,” Fitch said in a report Thursday.

Gov. Chris Christie has projected revenue growth of 7.9% in the fiscal year that began July 1, helped by gains in personal income, sales levies and corporate tax receipts, Fitch said. The projection might be optimistic given “the level of economic uncertainty and recent modest growth in actual revenues,” the credit-rating company said.

New Jersey’s unemployment rate climbed to a 35-year high of 9.9% in August from 9.8% in July and 9.4% a year earlier, the state Labor Department said Thursday. The figures are preliminary and can change once more thorough surveys have been conducted.

“Their analysts wanted to reiterate that the real fiscal problems facing the state are the same legacies of past administrations that Gov. Christie has worked to address since his first day in office,” Andy Pratt, a spokesman for Treasurer Andrew Sidamon-Eristoff, said of the Fitch report in an e-mail.

Kevin Roberts, a spokesman for Mr. Christie, didn’t respond to an e-mailed request for comment.

The state in recent years has raised the retirement age, required public workers to pay more toward their benefits and barred municipal contractors from enrolling in the pension fund.

New Jersey’s pension plan was 60.8% funded as of June 30, 2011, according to Fitch. As of June 30, 2012, debt outstanding was 7.8% of preliminary 2011 personal income. When combined with the pension obligations, that figure increases to 16.3%, above the 6% median for states rated by Fitch, the company said.