Standard & Poor's on Wednesday lowered its ratings on the state of New Jersey's general obligation debt to AA- from AA, citing financial stresses of its large unfunded pension liabilities.
The New Jersey Division of Investment, Trenton, oversees the state's seven pension funds, which have a combined $70.8 billion in assets. Total liabilities could not be learned by press time.
New Jersey has outstanding some $2.6 billion of general obligation debt, $27.8 billion of appropriation-backed debt and $2.5 billion of moral obligation debt, an S&P report issued Wednesday said.
S&P also lowered ratings on various state agencies' appropriation debt to A+ from AA- and lowered its ratings on the South Jersey Port Corp. to A- from A, the report states.
The outlook is stable for all the ratings, the report added.
“The lower rating reflects our concern regarding the stresses from the state's poorly funded pension system, substantial post-employment benefit obligations, and above-average debt levels,” Jeffrey Panger, credit analyst, said in the report. “The downgrade also reflects the application of Standard & Poor's newly adopted criteria on U.S. states, which more transparently incorporates debt, pension, and other post-employment liabilities, along with other rating factors.”
New Jersey state Treasurer Andrew Sidamon-Eristoff, responding to the downgrading, said in a statement: “While New Jersey's bonds remain sound and respected investments, this downgrade highlights the real danger of failing to act swiftly on critical pension, health benefit and fiscal reforms” proposed by Gov. Chris Christie in September.
“If enacted in its entirety, these pension reforms would enable (the plans) to achieve a 91% funding ratio by 2041,” the statement said.