Moody's Investors Service has upgraded to positive from stable the outlook for New Jersey's general obligation bonds, according to a Sept. 30 report from the ratings firm.
The bond rating remained at A2.
"The positive outlook is supported by the likelihood the state will continue its current practices for managing reserves and long-term liabilities, which could support improvement in the rating, the report said.
Moody's said the bond rating could be raised if the state demonstrates or makes a binding commitment "to maintain pension contributions at actuarially indicated levels," something the state has achieved for the previous and current fiscal years.
Other indicators for improvement include "implementation of structurally balanced budgets through economic cycles" and "maintenance of budgetary balances and liquidity above historic averages."
Warning signs for a rating downgrade include pension contributions that fall below actuarially indicated amounts, higher fixed costs as a percentage of revenue and failure to address substantial structural imbalances, the report said.
The New Jersey Pension Fund, Trenton, had assets of $91.5 billion as of May 31, according to the latest available data.
Moody's joins three other bond-rating agencies – S&P Global, Fitch and Kroll – in declaring a positive outlook for the state's general obligation bonds.