Fitch Ratings has downgraded New Jersey’s credit rating one notch to AA-, citing the state’s unfunded pension and benefit liabilities.
After the rating drop, the rating outlook for all affected bonds was revised to stable from negative.
The agency said it was dropping the rating “particularly in the context of a weak economic recovery, a high debt burden, limited financial flexibility and persistent structural imbalance.”
“The credit rating, at the current level reflects its high wealth levels and broad economy, offset by a high debt burden and a multitude of spending pressures, including continuing capital needs, as well as significant unfunded pension and employee benefits obligations,” the agency said in a release. “Despite the recent passage of pension and benefits reform legislation, which will restrain future growth in the state’s accumulated liabilities, continued pension funding level deterioration is projected through the medium term as full funding of the actuarially required contributions is several years off, resulting in sizeable increases in annually required contributions.”
Fitch also cited the state’s weak economic recovery, which has lagged behind the nation as a whole in both employment and income growth.
The agency has also downgraded to A+ the rating on state appropriation-backed debt issued through the following authorities:
New Jersey Transportation Trust Fund Authority
New Jersey Economic Development Authority
New Jersey Health Care Facilities Financing Authority
New Jersey Educational Facilities Authority
New Jersey Sports and Exposition Authority
New Jersey Building Authority