S&P downgraded New Jersey's debt rating today from A+ to A. This is the eighth time New Jersey's debt has been downgraded under Gov. Chris Christie's watch
(Star-Ledger file photo)
TRENTON — Another day, another debt rating downgrade for the state of New Jersey in response to Gov. Chris Christie's budget.
Standard & Poor’s today became the latest agency to downgrade New Jersey’s credit rating, saying that shorting the state's public employee pension obligation, making rosy revenue forecasts that didn't come true and relying on one-shot budget measures have put “additional pressure on future budgets.”
S&P also cited "lack of consensus among elected leaders on how to return to structural balance" and an "above-average debt burden."
This is the eighth time a credit rating agency has downgraded New Jersey since Christie took office in January 2010. And it comes just five days after another agency, Fitch, knocked New Jersey's rating down a peg. No New Jersey governor has had as many downgrades on his or her watch.
"The downgrade reflects our view that New Jersey will face increased long-term pressures in managing its long-term liabilities and that the revenue and expenditure misalignment will grow based on reduced funding of the state's unfunded actuarial accrued liability," said Standard & Poor's credit analyst John Sugden.
Downgrading a credit rating makes it more expensive for the state to borrow to fund things like road improvements and school construction, since lenders are likely to impose higher interest rates.
Chris Santarelli, a spokesman for the New Jersey Department of Treasury, said the downgrade was not surprising "given the tendency of rating agencies to follow one another closely in all actions—as they did leading up to the financial crisis of the late 2000s."
That was a shot at the agencies, which were widely criticized for giving positive ratings to unsound mortgage-backed financial instruments that helped tank the economy.
Santarelli said New Jersey's bonds are "still strong investment grade securities."
"Like Fitch, Standard & Poor’s rating action calls on the State’s elected leaders to take on the State’s long-term pension and health liabilities that will continue to place additional pressure on future budgets," Santarelli said. "While Governor Christie has been highlighting the issue and calling for bipartisan action to address these concerns since February, leaders in the Legislature continue to deny the problem and balk at the idea of additional reform."
Santarelli said that the Christie administration "has contributed more to the State Pension Fund than any other" and noted the governor set up a commission to recommend how to change the pension system — something Democrats who control the Legislature say they won't consider until the state makes its full pension payment.
S&P did cite two credit “strengths” for New Jersey: It still is one of the wealthiest states in the nation and has a “diverse economic base, which is showing signs of improvement, but has a long way to go to full recovery.”
The state's credit rating was moved from A+ to A. S&P last downgraded New Jersey, from AA- to A+, in April. The agency warned Christie in June that if he followed through with his plan to cut the state's payment to the pension system by $2.4 billion over two years in order to balance a massive shortfall in the budget, it would likely downgrade him again.
Christie went through with his plan to cut pension payments, and today S&P downgraded again.
“The governor vetoed the legislature's proposals to increase taxes to continue to fund pensions; therefore, it is likely that any pension reform proposals will be primarily focused on changes to retirement and health benefits, rather than on increased funding,” S&P’s note on the downgrade said. “In the absence of consensus between the legislative and executive branches, any type of pension solution is likely to be delayed and result in mounting financial pressures for the state in the long term.”
The repeated downgrades have already drawn attacks from national Democrats, since Christie is considering running for president in 2016. Michael Czin, a spokesman for the Democratic National Committee, called Christie a "national embarrassment."
“From his failed economic record to his Administration’s gross misconduct during Bridgegate, Chris Christie has failed his state time and again," Czin said. "And now, it doesn’t even look like he’s trying anymore. Instead of working with Democrats to solve the state’s long-term problems, Christie’s busy crisscrossing the country campaigning for Republicans who apparently want to emulate his failed leadership.”