Standard & Poor’s Ratings Services is lowering its rating on New Jersey’s general obligation bonds to A from A+ in part because of the worsening condition of the state’s pension funding ratio, said spokesman Alex Ortolani of S&P.
The downgrade “reflects our view that New Jersey will face increased long-term pressures in managing its long-term liabilities and that the revenue and expenditure misalignment will grow based on reduced funding of the state’s unfunded actuarial accrued liability,” said John Sugden, a Standard & Poor's credit analyst, in a news release.
The release cited what it called the state’s “demonstrated lack of commitment when it comes to funding its annual contributions,” as well as the state’s estimate that the funding ratio for the pension fund would drop to 48.2% by 2019 without legislative action, among the reasons for the downgrade.
On July 1, Gov. Chris Christie used a line-item veto to cut a previously promised $2.25 billion state payment to the $80.6 billion New Jersey Pension Fund, Trenton, to $681 million, when he signed a $32.5 billion state budget for the fiscal year ending June 30, 2015.
Mr. Christie had said the pension contribution reduction was necessary to balance the state budget. He also vetoed taxes approved by the state Legislature that were designed to help balance the budget.
In May, the governor cut a promised state payment to the New Jersey Pension Fund for the fiscal year that ended June 30, 2014, to $696 million from $1.58 billion.
Mr. Christie in August named a nine-person pension study commission to make recommendations to improve the state’s public pension and health benefit systems.
Christopher Santarelli, spokesman for the New Jersey Treasury Department, which oversees the pension fund, did not return a phone call seeking comment by press time.