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Just two days prior Gov. Chris Christie called the credit rating agencies “bums,” but that didn’t stop one from downgrading New Jersey’s credit rating Wednesday.
Standard and Poor’s has lowered the Garden State’s credit rating down to an A from A+, making it the second-lowest rated state behind Illinois (A-). One bright spot: the outlook was changed from “negative” to ‘stable,” suggesting that another downgrade isn’t likely in the immediate future.
At a press conference Monday, Christie had dismissed concerns about a downgrade, claiming that the rating agencies are “being significantly overaggressive because they were such bums back in ‘08 and ‘09 and left everybody hanging out to dry.”
In its report, S&P cited the state’s problems with its public employee pension system, accusing the state of making unfounded rosy revenue predictions and having “a trend of structurally unbalanced budgets.”
“New Jersey continues to struggle with structural imbalance,” S&P analyst John Sugden said. “The governor’s decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state’s liability profile.”
The downgrade marks the eighth downgrade by a credit rating agency under Christie’s watch, tying him with disgraced former Gov. Jim McGreevey with the most downgrades for a NJ governor.
New Jersey’s treasurer’s office sought to reassure investors that the state is still a strong investment.
“New Jersey bonds are still strong investment-grade securities and highly coveted by municipal bond investors,” said Christopher Santarelli, a spokesman for the treasurer’s office.
Gov. Christie has called for further pension reform to address the state’s problems, but a formal plan needs to be introduced, says S&P’s John Sugden.
“Although in his State of the State and budget messages, the governor called for additional pension reform efforts, there has been no formal proposal released,” he 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.”
In February, Gov. Christie pledged to dedicate the rest of his governorship to fixing the state’s budget and pension problems.
“If we do not confront it boldly and directly soon, you will be left with very difficult choices that no one in this room will want to make,” he said. “I will not be a part of that capitulation. This is the goal that I will dedicate myself to in the remaining years of my governorship.”
This latest downgrade comes less than a week after Fitch Ratings downgraded New Jersey to A with a negative outlook.
As a result of these downgrades, the state could have a harder time borrowing money affordably for capital-intensive projects.
Featured image: Shutterstock.com
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