N.J. credit rating gets first upgrade from Wall Street in nearly 20 years

Published: Mar. 02, 2022

New Jersey’s financial outlook got a big boost Wednesday, just days before Gov. Phil Murphy is set to give his annual state budget address to the state Legislature.

Moody’s Investor Service upgraded New Jersey’s credit rating one notch to A2, the state’s first upgrade in 17 years. The announcement comes after all four rating agencies upgraded New Jersey’s credit outlook from “negative” to “positive” in the wake of a massive $46.4 billion state budget signed last June.

“Our efforts to build New Jersey’s credit rating back up from decades of downgrades have yielded another positive result,” Murphy said in a statement. “This proves that facing our challenges head on -- rather than delaying and deferring — is the best way to get our house in order.”

The recent improvements represent a significant shift in the state’s financial outlook, which seemed dire during the early stages of the COVID-19 pandemic.

Widespread shutdowns were expected to hammer state tax revenue, and Murphy issued nearly $4 billion in emergency bonds to cover projected shortfalls. When the estimates proved wrong and tax revenues came in much higher than expected, the Democratic governor and the Democratic-controlled Legislature signed a state budget flush with billions in cash.

They used a portion of the surplus to make a historic $6.9 billion contribution to the state’s pension fund and set aside $3.7 billion to retire existing debt, efforts that won over rating agencies.

Moody’s on Wednesday partly attributed the rating upgrade to the completion of the debt reduction program and increased pension contributions, “which are consistent with improving governance and fiscal management,” the agency said.

“I’m proud to say that making the full pension payment, retiring more than $3 billion in bonded debt, and reducing our reliance on borrowing has improved the State’s fiscal footing without slashing the vital programs benefitting New Jersey families,” Murphy said.

State Sen. Declan O’Scanlon, R-Monmouth, downplayed the rating upgrade Wednesday and said it was largely the result of bipartisan efforts under Republican former Gov. Chris Christie to build toward a full pension payment.

“To be frank, New Jersey should consider itself lucky this upgrade happened after the Murphy administration implemented billions in emergency borrowing that proved to be unnecessary as we had warned,” O’Scanlon told NJ Advance Media.

New Jersey’s credit has been a mess since the early 1990s when the state still had a triple-A credit rating. Murphy, a former Wall Street executive at Goldman Sachs, made improving the state’s beleaguered credit a priority during his first term.

The last upgrade in 2005 was followed by 13 downgrades between 2011 and 2020, 11 of those during Christie’s two terms as governor. And the state pension fund, which supports the retirement of about 800,000 active and retired state and local government workers, remains among the worst-funded in the nation.

In a statement released Wednesday, New Jersey Treasurer Elizabeth Maher Muoio said the improved credit rating would decrease the cost of annual borrowing and save taxpayers money.

“This is great news for the state and, more importantly, our taxpayers,” Muoio said. “But it also provides further evidence that we are taking the right steps on our continuing path toward fiscal security.”

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published this page in News and Politics 2022-03-03 03:28:23 -0800