On Friday, New Jersey was dealt another fiscal blow when rating agency Fitch downgraded New Jersey’s credit rating. The agency said New Jersey exacerbated “a key credit weakness” when it decreased its payments to the state pension system. From the Star-Ledger:
Wall Street analysts at Fitch Ratings today downgraded New Jersey’s bond rating for the second time this year, citing the state’s poor economic performance, Gov. Chris Christie’s rosy revenue forecasts — which failed to materialize — and his decision to plug the resulting budget gap by cutting $2.4 billion in funding for the state’s strained pension system.
Fitch said Christie’s decision to cut the pension payments this year marked a “repudiation” of a bipartisan plan he signed to fix the beleaguered retirement system for public workers, which is underfunded by nearly $40 billion, according to state estimates.
Instead of pumping bigger cash infusions every year into workers’ retirement accounts to save them from collapse — as Christie and lawmakers agreed to do in his first term — New Jersey is now stepping away from its plan, Fitch said.
“Following significant revenue underperformance, the state relied upon the repudiation of its statutory contribution requirements to the pension systems to return to budgetary balance, exacerbating a key credit weakness,” the Fitch analysts wrote in a note to investors, lowering their rating on the state’s debt from A+ to A.
New Jersey’s Treasury department responded to the downgrade by defending Christie’s decision to divert much of the state’s pension payment into the general budget. From The Star-Ledger:
A spokesman for the state Treasury Department said Christie “acted responsibly” by shrinking two pension payments that had been scheduled for the current and previous fiscal years.
“Without raising taxes on an already overburdened populace, Governor Christie has already contributed more to the pension system than any previous governor,” said the Treasury spokesman, Chris Santarelli, in an emailed statement.
“As rating agencies and ratings expectations have been recalibrated following the financial crisis of the late 2000s, the state Treasury and Office of Public Finance have worked tirelessly to ensure that New Jersey is rated fairly and equally by the Wall Street rating agencies; and will continue to do so.”
This is the second time in five months Fitch has downgraded New Jersey’s credit rating.
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