Fitch raises New Jersey debt outlook to positive from negative

Fitch Ratings raised its outlook for New Jersey's debt to positive from negative, the third ratings agency to elevate the economic outlook in the past four weeks.

S&P Global Ratings raised its New Jersey outlook to positive from stable on Aug. 3, and Moody's Investors Service raised its outlook to positive from stable on July 13.

Fitch, which announced its decision Thursday, also retained its A- rating on New Jersey's general obligation bonds.

Fitch said in a report Thursday that its revised outlook "reflects the rapid turnaround in the state's fiscal condition as it recovers from the coronavirus pandemic."

The improvement was due to "a solid economic rebound, state balancing actions during the pandemic and multiple rounds of federal assistance are now providing the state with both a solid financial cushion and extra capacity to accelerate progress on its high liabilities," the report said.

"Fitch views the state as being well positioned in the near term to continue progress on its longer-term fiscal challenges" while managing through "current uncertainties," the report added.

Fitch also cited several financial challenges.

"The state's long-term liability burden is elevated and well above that of most U.S. states, reflecting its considerable outstanding debt and large net pension liabilities," the report said. "The burden has declined in recent years, in step with pension contribution increases, but future capital needs and continued pension demands will likely keep this ratio at a comparatively high level."

The report also characterized state's other post-employment benefits liability — primarily health-care costs — as "significant," adding that the costs have "fallen considerably given state action to trim benefit costs."