The Kroll Bond Rating Agency has upgraded its outlook for New Jersey's general obligation bonds to positive from stable while retaining an A rating on the bonds.
Kroll joins three other bond-rating agencies in upgrading the state's general obligation bond outlook: Fitch Ratings, to positive from negative in August 2021; S&P Global Ratings to positive from stable in August 2021; and Moody's Investors Service to positive from stable in July 2021.
"The positive outlook reflects the robust recovery of the state's financial picture since the early days of the pandemic and ample liquidity which have positioned the state to set aside funds to pay down long-term debt and, critically, follow through with plans to restore actuarially sound pension contributions beginning in FY 2022," a Jan. 11 Kroll report said.
"Upward movement in the rating assumes that the state will take steps necessary to maintain full actuarial funding on a go-forward basis, allowing it to gradually restore its pensions to sound funding status in the decades ahead," the report said. "Consistency in both pension funding and the maintenance of strong reserves will be integral to upward movement in the rating."
The report cited hurdles for an improved rating "especially given that at least a portion of the state's recent financial improvement was driven by deficit financing and non-recurring pandemic-related federal assistance."
The report also noted that "while the current administration has placed a high priority on improving the state's overall fiscal health, prior administrations with similar objectives failed to address the perennial underfunding of the state's pensions."