Standard & Poors downgraded New Jersey’s credit rating today, and—surprise, surprise—the state’s pension funds were a major factor.
S&P downgraded New Jersey’s credit rating one notch. It has gone from what S&P considers a “high grade” (A+) to a “medium grade” (AA-).
The downgrade comes despite efforts by lawmakers, including Gov. Chris Christie, to curb the state’s pension woes. Those efforts included mandating higher annual payments by the state, raising retirement ages, freezing cost-of-living-adjustments and increasing employee contributions.
From the New Jersey Spotlight:
In explaining the decision to lower New Jersey’s credit rating from AA- to A+– a rating higher than only California’s A and Illinois’s A- among the 50 states – S&P’s analysis specifically cited a “trend of structurally unbalanced budgets that include only partial funding of pension obligations and the reliance on one-time measures that are contributing to additional pressure on future budgets; a large and growing unfunded pension liability; significant postemployment benefit obligations; and an above-average debt burden.
Notice the bolded statements—that’s a whole lot of ways for S&P to say that pensions are crippling the state’s finances.
And you can’t blame them. New Jersey’s pension fund remains underfunded by about $52 billion.
Photo Credit: Bob Jagendorf via Wikimedia Creative Commons