Citing the state's sizable unfunded retirement obligations, Standard & Poor's yesterday downgraded New Jersey's general obligation debt to AA-. Now only two states, California and Illinois, have lower ratings.
The emphasis on pension debt reflects a trend among the rating agencies to consider not only a state's immediate budget woes and outstanding bond debt, but also its long-term retirement obligations. As S&P wrote in its downgrade of Jersey, "The lower rating
reflects our concern regarding the stresses from the state's poorly funded
pension system, substantial postemployment benefit obligations, and
above-average debt levels."
Speaking at a town hall meeting in Union, N.J., Gov. Chris Christie said of the downgrade: "The clock is ticking away on
a pension and benefit bomb that can damage the health of the finances of our
state. If we
don't show we're going to reform this system, it will cost New Jersey."
Christie sparked controversy in mid-January when he said that rising worker health care costs might "bankrupt' the state on the same day that a Jersey agency reduced the size of a proposed bond sale because of poor market conditions. Critics blamed the governor's remarks, though Jersey officials said the decision to cut the size of the sale represented deteriorating investor confidence in municipal bonds in general.
In the wake of yesterday's downgrade, the state's treasurer, Andrew Sidamon-Eristoff, said that, "The financial markets can send no clearer signal that the Legislature needs to follow the governor's lead and act on the pension and benefit reforms he proposed last September -- legislation that is critical to reviving the economy and restoring the state's fiscal integrity."
Christie sparked controversy in mid-January when he said that rising worker health care costs might "bankrupt' the state on the same day that a Jersey agency reduced the size of a proposed bond sale because of poor market conditions. Critics blamed the governor's remarks, though Jersey officials said the decision to cut the size of the sale represented deteriorating investor confidence in municipal bonds in general.
In the wake of yesterday's downgrade, the state's treasurer, Andrew Sidamon-Eristoff, said that, "The financial markets can send no clearer signal that the Legislature needs to follow the governor's lead and act on the pension and benefit reforms he proposed last September -- legislation that is critical to reviving the economy and restoring the state's fiscal integrity."
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